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Part B (13 marks) Bronco Oil has begun offshore drilling in waters off the north of Barbados. As a new venture they are using
Part B (13 marks) Bronco Oil has begun offshore drilling in waters off the north of Barbados. As a new venture they are using estimates derived from research studies. Crude oil pumped from the wells will generate three products from a joint processing operation. Joint processing cost up to split-off total $8,500,000 per quarter. Estimated information for the most recent quarter is presented below: Product A B C Final selling price Quarterly Output in Selling price at split-off Additional processing (Barrels) cost 240,500 370,000 $ 20.00 13.75 $ 1560,630 $31.75 145,000 30.00 1060,375 960,000 19.50 40.00 The additional processing results in a 3% normal loss in volume. Required 1) Allocate the joint cost using: a) the Sales value at split off method b) the net realizable method. (6 Marks) 2) Which products should be processed further? (7 Marks)
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