1. Exxon Oil uses a joint manufacturing process in the production of 2 grade levels of gasoline; 87 octane and 89 octane. The joint manufacturing process yields 5,000 gallons of crude oil and incurs joint costs of $20,000. Each 5,000 gallon batch of crude oil converts as follows: 3000 gallons of 87 octane, which incurs $10,000 of separate costs and sells for $10 per gallon and 2000 gallons of 89 octane, which incurs $12,000 of separable costs and sells for $12 per gallon. Exxon uses the net realizable value method to allocate the joint material costs. The company is debating whether or not to process the 89 octane further into a new product, 93 octane, which would incur an additional $4,000 in costs and sell for $15 per gallon. If the 93 octane is produced, income would increase by

   		$26,000
   		$2,000
   		$5,760
   		$14,000