2. Which method do you recommend and why? Keep in mind that your recommendation should be justifiable to the tax authorities. A text box is provided for you to indicate and explain your recommendation.

L&G Ltd. a large oil refining company jointly processes purchased hydrocarbons to generate 3 non-saleable intermediate products: ICR8, ING4 and XGE3. L&G's joint processing costs for these intermediate products were $180,000 in August 2021. These intermediate products are further processed separately to produce Crude Oil, Natural Gas Liquids and Natural Gas (measured in liquid equivalents) respectively. The following information for August 2021 is available: Separable costs after splitoff Selling price (per barrel) Volume sold (barrels) ING4/Natural XGE3/Natural ICR8/Crude Oil Gas Liquids Gas $ 51,500 $ 28,500 $ 60,000 $ 57.00 $ 45.00 $ 3.70 14,600 5,200 80,000 A federal law has recently been passed that taxes crude oil at 30% of operating income. No new tax is to be paid on natural gas liquids or natural gas. Starting in August 2021 L&G must report a separate product-line income statement for crude oil. As the assistant controller, you have been asked by the controller to look into how to allocate the joint cost of producing the three separable saleable outputs. Assume no beginning or ending inventory. Required (answer the 2 questions below): 1. As the assistant controller, prepare a report to the controller that considers the physical measure, NRV and gross margin methods of allocating joint costs. Show calculations/work