Question
Petro-Chem, Inc., is a small company that acquires high-grade crude oil from low- volume production wells owned by individuals and small partnerships. The crude oil
Petro-Chem, Inc., is a small company that acquires high-grade crude oil from low- volume production wells owned by individuals and small partnerships. The
crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the technology or capacity to process these products
further and sells most of its output each month to major refineries. There were no beginning inventories of finished goods or work-in-process on November 1. The production costs and output of Petro- Chem for November are shown in the next column.
Crude oil acquired and placed in production
$5,000,000 Direct labor and related costs 2,000,000 Manufacturing overhead 3,000,000 Production and sales
- Two Oil, 300,000 barrels produced; 80,000 barrels sold at $20 each
- Six Oil, 240,000 barrels produced; 120,000 barrels sold at $30 each
- Distillates, 120,000 barrels produced and sold at $15 each
[ 55 ] The portion of the joint production costs assigned to Six Oil based upon physical output is
A. $3,636,000
B. $3,750,000
C. $1,818,000
D. $7,500,000
[ 59 ] Which of the following is true about activity-based costing?
- It should not be used with process or job costing.
- It can be used only with process costing.
- It can be used only with job costing.
- It can be used with either process or job costing.
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