Question

Toil & Oil processes crude oil to jointly produce gasoline, diesel, and kerosene. One batch produces 3,415 gallons of gasoline, 2,732 gallons of diesel, and 1,366 gallons of kerosene at a joint cost of $12,000. After the split-off point, all products are processed further, but the estimated market price for each product at the split-off point is as follows:

Gasoline	$2 per gallon
Diesel	1 per gallon
Kerosene	3 per gallon

Using the market value at split-off method, allocate the $12,000 joint cost of production to each product.

Joint Product	Allocation
Gasoline	$
Diesel
Kerosene
Totals	$

Answer 1

Job Products	Quality (per gallon) (i)	Selling price ( per gallon) (ii)	Sales Value (i) x(ii)	Allocation rate	Cost to be allocated
Gasoline	3,415	2	6,830	6,830/13,660= 50%	12,000 x 50% = 6,000
Diesel	2,732	1	2,732	2,732/13,660 = 20%	12,000 x 20% = 2,400
Kerosene	1,366	3	4,098	4,098/13,660 = 30%	12,000 x 30% = 3,600
Total			$13,660		$12,000

Joint Product	Allocation
Gasoline	6,000
Diesel	2,400
Kerosene	3,600
Totals	$12,000

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