Question

Process	Some Products produced from Pprocess
Refining a barrel of crude oil	Gasoline, diesel fuel, gas, naphtha, kerosene
Distillation of coal	Coke, gas
Processing of mineral ore	Gold, silver
Processing of raw milk	Cream milk, liquid milk, cheese

Questions

1. The cost of refining a barrel of crude oil is $500 dollars per barrel. The company refines 4 barrels of crude oil and the result of this process leads to the production of gasoline and kerosene. Identify the amount of the joint costs and identify the joint products.

2. The company processes 600 litres of raw milk at $50 per litre which leads to the production of cream milk and liquid milk. What are the total joint costs and what are the joint products?

Now please provide answers to the following questions.

3. If a process yields only one final product for sale, has a joint cost been incurred?

a. Yes b. No

4. If a process yields more than one product, has a joint cost been incurred?

a. Yes b. No

Answer 1

Joint costs are those which are incurred on a process which leads to production of more than one product

Such products are knows as joint products

1. Joint costs =$500 per barrel i.e. 500*4 =$2,000

Joint products = gasoline and kerosene

2. Joint costs =$50 per liter i.e. 50*600 =$30,000

Joint products = cream milk and liquid milk

3. B. no, since only one product

4. A. Yes