Question

St Thomas Ol & Gas, a large energy conglomerate in processes purchased hydrocarbons to generate three nonsalable intermediate products: ICRB, INGA, and XGE. These intermediate products are further processed separately to produce crude oil, natural gas liquids INGL), and natural gas (measured in liquid equivalents) A federal law that has recently been passed awesorude oil at 30% of operating income. No new takis to be paid on natural gas liquid or natural gas Click the icon to view additional information.) Read the girements

Answer 1

In case of physical measure method, the joint costs are allocated on the basis of weight of total production.

Particulars	Crude oil	NGL	Gas	Total
Physical measure of total production	175	75	550	800
Percentage (weight)	0.21875	0.09375	0.6875	1
Joint costs allocated	437.5	187.5	1375	2000

In case of NRV method, joint costs are allocated on the basis of net realizable value at split off. NRV at split off is computed by deducting separable costs from final sales of production.

Particulars	Crude oil	NGL	Gas	Total
Physical measure of total production	175	75	550
Rate	22	13	1.5
Final sales of production	3850	975	825
Less: separable costs	210	90	235
NRV at split off percentage	3640	885	590	5115
NRV at split off percentage (weight)	0.71163	0.17302	0.11535	1.00000
joint costs allocated	1423.26	346.04	230.69	2000.00