Mega Oil Company transports crude
oil to its refinery where it is processed into main products gasoline,
kerosene, and diesel fuel
P6-11Mega
Oil Company transports crude oil to its refinery where it is processed into
main products gasoline, kerosene, and diesel fuel, and by product base oil. The
base oil is sold at the split-off for $500,000 of annual revenue, and the joint
processing cost to the get the crude oil to split-off are $5,000,000.
Additional information includes:
Product
Barrels
produced Cost of
Split-off Selling Price Per
Barrel
Gasoline
500,000
$2,000,000
$25
Kerosene
100,000
500,000
30
Diesel
fuel
250,000
1,000,0000
20
Determine the allocation of joint
costs, using the relative sales value method, (Hint: Reduce the amount of the
joint costs to be allocated by the amount of the by-product Revenue)
TUTORIAL PREVIEW
Problem 6-11
|
Product
|
Barrels
|
Price/Barrel
|
Ultimate Sales Value
|
Costs After Split-Off
|
Sales Value at Split-Off
|
Sales Value Percentage
|
Joint Costs Assigned
|
|
Gasoline
|
500,000
|
$ 25
|
$
12,500,000
|
$
2,000,000
|
$
2,941,176
|
61.8%
|
$
2,781,000
|
File name: P6-11Mega Oil.xls File
type: xls PRICE: $6
