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Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate two intermediate products: ING4, and XGE3. These intermediate products are further
- Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate two intermediate products: ING4, and XGE3. These intermediate products are further processed separately to produce Crude Oil and Natural Gas Liquids (NGL). In June 2019, the following is the monthly data for all the products:
| Joint costs | Crude Oil | Natural Gas Liquids | |||||
Joint Costs (costs of Hydrocarbons and other inputs and processing to split-off point) | $1,800 |
|
| |||||
Separable costs of processing 400 tons of ING4 into 150 tons of Crude Oil |
|
| $175 |
|
| |||
Separable cost of processing 500 tons of XGE3 into 50 tons of Natural Gas Liquids |
|
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| $105 |
| |||
Transfer for further processing (tons) | ING4 | XGE3 | Crude Oil | Natural Gas Liquids |
| |||
Beginning inventory (tons) | 0 | 0 | 0 | 0 |
| |||
Production (tons) | 400 | 500 | 150 | 50 |
| |||
Sales (tons) | 400 | 500 | 150 | 50 |
| |||
Selling price per ton | $8 | $5 | $18 | $15 |
| |||
- Allocate the joint costs of $1,800 between ING4 and XGE3 under
- the sales value at split-off method
- the physical-measure method.
- Allocate the joint costs of $1,800 between crude oil and natural gas liquids under the NRV method.
- Should XGE3 be processed further or sold at the split-off point?
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