Rieppel 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.) An overview of the process and results for August 2020 are shown here (Note: The numbers are small to keep the focus on key concepts.) Joint Costs $1,800 ICR8 Separable Costs Processing $175 Crude Oil 150 barrels @ $18 per barrel Hydrocarbons Processing Processing ING4 $105 Processing XGE3 $210 NGL 50 barrels @ $15 per barrel Natural Gas 800 eqvt. barrels @ $1.30 per eqvt. barrel A federal law that has recently been passed taxes crude oil at 30% of operating income. No new tax is to be paid on natural gas liquids or natural gas. i (Click the icon to view additional information.) Read the requirements. Starting August 2020, Rieppel Oil & Gas must report a separate product-line income statement for crude oil. One challenge facing Rieppel Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. 1. 2. 3. Allocate the August 2020 joint cost among the three products using the following: a. Physical-measure method b. NRV method. Show the operating income for each product using the methods in requirement 1. Discuss the pros and cons of the two methods to Rieppel Oil & Gas for making decisions about product emphasis (pricing, sell-or-process- further decisions, and so on). 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.) Physical measure of total production Weighting Joint costs allocated Crude Oil NGL Gas Total