Sesnie 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.) 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. 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 125 75 800 1000 0.125 0.075 0.8 1 1600 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 focus on key concepts.) Joint Costs $1,600 ICR8 Separable Costs Crude Oil Processing $150 125 barrels @ $16 per barrel Processing NGL 75 barrels @ $15 per barrel Hydrocarbons Processing ING4 $115 Processing XGE3 $225 Natural Gas 800 eqvt. barrels @ $1.30 per eqvt. barrel More info Starting August 2020, 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. Requirements 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 Sesnie Oil & Gas for making decisions about product emphasis (pricing, sell-or-process- further decisions, and so on)