Question

Can you assist with the below?

Hfx Oil​ & Gas, a large energy​ conglomerate, jointly processes purchased hydrocarbons
to generate three nonsaleable 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).
An overview of the process and results for August 2018 follows:
Note: numbers are small
A new law has recently been passed that taxes crude oil at​ 30% of operating income.
No new tax is to be paid on natural gas liquid or natural gas. Starting August 2018
Hfx Oil​ & Gas must report a separate​ product-line income statement for crude oil. One challenge facing
Hfx Oil​ & Gas is how to allocate the joint cost of producing the three separate saleable outputs.
Assume no beginning or ending inventory.
		Crude Oil	NGL	Gas
Joint Costs	$                         1,600
Separable Costs		$                            210	$                                 90	$                             235
		175 barrels @ $22	75 barrels @ $13	550 eq barrels @ $1.50

Question 1.

Allocate the August 2018 joint Cost among the three products using physical measures method (8)

Prepare opertaing income statement for each product required in 1 (5)

Allocate the August 2018 joint Cost among the three products using NRV method (8)

Answer 1