Chevron Corporation produces gasoline and diesel from crude oil. The following information is available for a joint process:
•Joint costs: $500,000
•Gasoline: 10,000 gallons, sales value $30 per gallon
•Diesel: 15,000 gallons, sales value $20 per gallon
Required:
1.Allocate the joint costs using the sales value at split-off method.
2.Calculate the cost per gallon for gasoline and diesel.
3.Discuss the implications of joint costing on pricing decisions.