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Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three A federal law that has recently been passed taxes crude
Sinclair Oil \& Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three A federal law that has recently been passed taxes crude oil at 30% of operating income. No new tax is to be paid nonsalable intermediate products: ICR8. ING4, and XGE3. These intermediate products are further processed on natural gas liquid or natural gas separately to produce crude oil, natural gas liquids (NGL), and natural gas (measured in liquid equivalents). (1) (Click the icon to view additional information.) Read the requirements. Requirement 1. Allocate the August 2017 joint cost among the three products using the (a) Physical-measure method and (b) NRV method. More info First, allocate the August 2017 joint cost using the physical-measure method. (Round the weights to five decimal places and joint costs to the Crude Oil NGL Physical measure of total production Weighting Joint costs allocated Starting August 2017, Sinclair Oil \& Gas must report a separate product-line income statement for crude oil. One challenge facing Sinclair Oil \&. Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Requirements Overview of the process and results. 1. Alocate the August 2017 joint cost among the three products using the following: a. Physical-measure method An overview of the process and results for August 2017 are shown here (Note: The numbers are small to keep the b. NRV method. focus on key concepts.) 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 Sinclair Dil \& Gas for making decisions about product emphasis (pricing, sell-or-processfurther decisions, and so on)
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