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Mega Oil Company transports crude oil to its refinery where it is processed into 3 main products: gasoline, kerosene, and diesel fuel. Each product
Mega Oil Company transports crude oil to its refinery where it is processed into 3 main products: gasoline, kerosene, and diesel fuel. Each product may be sold as is at the split-off point or processed further to a higher grade of product. The joint processing cost to get the crude oil to split-off is $100,000. Additional information includes: Barrels Selling Price per Barrel Product Produced at Split-off Costs after Spilt-off (in total) Selling Price per Barrel after Split-off Gasoline 4,000 $25 $9,000 $27 Kerosene 3,000 30 6,000 33 Diesel fuel 2,000 25 5,000 28 (1) To maximize the company's profit, which product needs to be sold as is at split-off and which product needs to be processed further beyond split-off [Show your computational work for this incremental analysis clearly, otherwise NO credit is given!]. Based on your sell-or-processed further decision above, (2) allocate the joint cost using the Net Realizable Value method. All numbers are rounded to 4 decimal places if necessary (e.g., 0.265367832... 0.2654 or 26.54%). [25 POINTS]
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