Answer to Question #143888 in Finance for Mr. Dinesh Pal Singh

Question

79. Why should goods produced in fixed proportions be regarded as a product package in developing production and pricing strategies?

Answer 1

When goods are produced in fixed proportion they should be thought of as a product package because there is no way to produce one part of this package without also producing the other part, there is no conceptual basis for allocating total production costs between the two goods.