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E16-26 (similar to) Question Help St. Thomas Oil & Gas, a large energy conglomerate joint processes purchased hyrocarbons to generate three nonsalable intermediate procucts: ICR8,
E16-26 (similar to) Question Help St. Thomas Oil & Gas, a large energy conglomerate joint processes purchased hyrocarbons to generate three nonsalable intermediate procucts: ICR8, ING4, and XGE3. These intermediate products are further processed separately to produce crude ol, natural gas liqulds (NGL), and natural gas (measured in lquid equivalents). Click the icon to view the overvlew) A federal law that has recently been passed taxes crude oll at 30% of operating income. No new tax is to be paid on natural gas liquid or natural gas. i (Click the Icon to view addlitional information.) Read the requiremse 1 More Info Requirement 1. Allocate the August 2017 oint cost among the three products using the (a) Physical measure mcthod and (b NRV m First, allocate the August 2017 jaint cost using the physical-measure method. (Round the weights to five decimal places and joint costs to Starting August 2017, St. Thomas Oil & Gas must report a separate product-line income statement for crude oil. One chalenge facing St. Thomas Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending NGL Crude oil Gas Total Physical measure of total production inventory Weighting Joint costs allocated Print Done Overv Requirements An overview of the process and results for August 2017 are shown here (Note: The numbers are small to keep the focus on key concepts.) 1. Allccate the August 2017 joint cost among the three products using the following: Joint Costs Separable Costs a. Phyaical-measure methad b. NRV method Cruie O 200 harrals $20 per barrel 2. Show the operating income for each product using the methoda in requirement 1 S175 3. Discuss the pros and cons of the two methods to St. Thomas Oil& Gas for making decisions about product emphasis (pricing, sell-or-process-further decisions, and so NGL lydrocarns 100 barrels ING4 S120 $19 per barrel Print Done Natura as 700 eql. barrels S1 20 per oqt. banel Processin 4 Pamaining XGE3 Clear AI
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