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BP plc refines crude oil into gasoline and kerosene. In July 2039, the company incurs joint costs of $25,000,000 for processing 500,000 barrels of crude

BP plc refines crude oil into gasoline and kerosene. In July 2039, the company incurs joint costs of $25,000,000 for processing 500,000 barrels of crude oil.

Requirements:

  • Allocate joint costs using the physical units method.
  • Allocate joint costs using the sales value at split-off method.
  • Calculate the cost per unit for gasoline and kerosene.
  • Prepare a cost reconciliation statement.
  • Discuss the implications of different cost allocation methods on product pricing and profitability.s

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