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Sweeney Oil \& Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsalable intermediate products: ICR8, ING4, and XGE3. These intermediate products are further processed separately to produce crude oil, natural gas liquids (NGL), and natural gas (measured in liquid equivalents). (Click the icon to view the overview.) Afederallawthathasrecentlybeenpassedtaxescrudeoilat30%ofoperatingincome.Nonewtaxistobepaidonnaturalgasliquidsornaturalgas.(Clicktheicontoviewadditionalinformation.) Requirement 1. Allocate the August 2020 joint cost among the three products using the (a) Physical-measure method and (b) NRV method. First, allocate the August 2020 joint cost using the physical-measure method. (Round the weights to five decimal places and joint costs to the nearest cent.) Overview of the process and results. An overview of the process and results for August 2020 are shown here (Note: The numbers are small to keep the More info Starting August 2020, Sweeney Oil \& Gas must report a separate product-line income statement for crude oil. One challenge facing Sweeney Oil \& Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Requirements 1. Allocate the August 2020 joint cost among the three products using the following: a. Physical-measure method b. NRV method. 2. Show the operating income for each product using the methods in requirement 1. 3. Discuss the pros and cons of the two methods to Sweeney Oil \& Gas for making decisions about product emphasis (pricing, sell-or-processfurther decisions, and so on). Interlock Soy Products (USP) buys soybeans and processes them into other soy products. Each ton of soybeans that USP purchases for $360 can be converted for an additional $200 into 675lbs of soy meal and 160 gallons of soy oil. A pound of soy meal can be sold at splitoff for $1.48 and soy oil can be sold in bulk for $4.5 per gallon. USP can process the 675 pounds of soy meal into 725 pounds of soy cookies at an additional cost of $350. Each pound of soy cookies can be sold for $2.48 per pound. The 160 gallons of soy oil can be packaged at a cost of $230 and made into 640 quarts of Soyola. Each quart of Soyola can be sold for $1.55. Read the requirements. Requirement 1. Allocate the joint cost to the cookies and the Soyola using the (a) Sales value at splitoff method and (b) NRV method. a. First, allocate the joint cost using the Sales value at splitoff method. (Round the weights to three decimal places and joint costs to the nearest dollar.) Requirements 1. Allocate the joint cost to the cookies and the Soyola using the following: a. Sales value at splitoff method b. NRV method 2. Should USP have processed each of the products further? What effect does the allocation method have on this decision
