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5 September, 09:48

Why might the number of products in a joint-cost situation differ from the number of outputs? Give an example.

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  1. 5 September, 11:33
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    A. The number of products can differ from the number of outputs when the joint production of one product produces multiple outputs. All of these outputs generate revenues, such as the offshore processing of hydrocarbons yields purified water that is bottled as well as yielding oil and gas.

    B. The number of products can differ from the number of output when the joint production process of two or more products become separately unidentifiable. Therefore a company can have multiple outputs with only one product having a positive sales value. If multiple kinds of timber (logs) are processed into standard lumber and wood chips, standard lumber is the one product that has positive sales and wood chips are the recycled back into the environment.

    C. A product is any output that has a positive sales value (or an output that enables a company to avoid incurring costs). In some joint-cost settings, outputs can occur that do not have a positive sales value. The offshore processing of hydrocarbons yields water that is recycled back into the ocean as well as yielding oil and gas.

    D. A product is any output that has a positive sales value (or an output that enables a company to avoid incurring costs). The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products are called byproducts. The fine-grade lumber and standard lumber are joint products and the wood chips are byproducts.

    Answer:

    C

    Explanation:

    A joint-cost production process may result in different outputs, but not all of them are products, for example in oil and natural gas extraction processes, you also get water which is an output but not a product since it is returned to the environment. Many times depending on the location of the oil field, even natural gas is not considered a product and it is simply burnt.
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