Sesnie Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsalable intermediate products: ICRB, 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.) Requirement 1. Allocate the August 2017 joint cost among the three products using the (a) Physical-measu First, allocate the August 2017 joint cost using the physical measure method. (Round the weights to five de Crude Oil NGL Gas Total Physical measure of total production Weighting Joint costs allocated An overview of the process and results for August 2017 are shown here (Note: The numbers are small to keep the focus on key concepts.) Joint Costs - Separable Costs $2,000 Crude Oil Processing 200 barrels @ $175 $20 per barrel ICRA Hydrocarbons NGL 100 barrels @ $19 per barrel Processing Processing S120 ING4 Natural Gas 700 eqvt. barrels @ $1.20 per evt. barrel Processing $195 XGE3 Question Help 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 liquid or natural gas. A (Click the icon to view additional information.) i More Info Starting August 2017, Sesnie Oil & Gas must report a separate product-line income statement for crude oil. One challenge facing Sesnie Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Print Done Requirements cen Allocate the August 2017 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 Sesnie Oil & Gas for making decisions about product emphasis (pricing, sell-or-process. further decisions, and so on). Sesnie Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsalable intermediate products: ICRB, 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.) Requirement 1. Allocate the August 2017 joint cost among the three products using the (a) Physical-measu First, allocate the August 2017 joint cost using the physical measure method. (Round the weights to five de Crude Oil NGL Gas Total Physical measure of total production Weighting Joint costs allocated An overview of the process and results for August 2017 are shown here (Note: The numbers are small to keep the focus on key concepts.) Joint Costs - Separable Costs $2,000 Crude Oil Processing 200 barrels @ $175 $20 per barrel ICRA Hydrocarbons NGL 100 barrels @ $19 per barrel Processing Processing S120 ING4 Natural Gas 700 eqvt. barrels @ $1.20 per evt. barrel Processing $195 XGE3 Question Help 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 liquid or natural gas. A (Click the icon to view additional information.) i More Info Starting August 2017, Sesnie Oil & Gas must report a separate product-line income statement for crude oil. One challenge facing Sesnie Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Print Done Requirements cen Allocate the August 2017 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 Sesnie Oil & Gas for making decisions about product emphasis (pricing, sell-or-process. further decisions, and so on)
