16-26 Joint-cost allocation, process further. Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
16-26 Joint-cost allocation, process further. Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsalable 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 2017 are shown here. (Note: The numbers are small to keep the focus on key concepts.) loint Costs Separable Costs - S1,800 Processing $175 Crude Oll 150 barrels a $18 per bamel ICRS NGI. 50 barrels a $15 per bamel Hydrocarbons Processing $105 Processing INCA Natural Gas Processing $210 B00 eqt. barrels a S1.30 per egvi. harrel A federal law that has recently been passed taxes crude oil at 30% of operating income. No new tax is to be paid on natural gas liquids or natural gas. Starting August 2017, Sinclair Oil & Gas must report a separate product-line income statement for crude oil. One challenge facing Sinclair Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Required: 1. Allocate the August 2017 joint cost among the three products using the following: a. Physical-measure method b. NRV method 2. Show the operating income for each product using the methods in requirement 1. 3. Discuss the pros and cons of the two methods to Sinclair Oil & Gas for making decisions about product emphasis (pricing, sell-or-process-further decisions, and so on). 4. Draft a letter to the taxation authorities on behalf of Sinclair Oil & Gas that justifies the joint-cost-allocation method you recommend Sinclair use. 16-26 Joint-cost allocation, process further. Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsalable 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 2017 are shown here. (Note: The numbers are small to keep the focus on key concepts.) loint Costs Separable Costs - S1,800 Processing $175 Crude Oll 150 barrels a $18 per bamel ICRS NGI. 50 barrels a $15 per bamel Hydrocarbons Processing $105 Processing INCA Natural Gas Processing $210 B00 eqt. barrels a S1.30 per egvi. harrel A federal law that has recently been passed taxes crude oil at 30% of operating income. No new tax is to be paid on natural gas liquids or natural gas. Starting August 2017, Sinclair Oil & Gas must report a separate product-line income statement for crude oil. One challenge facing Sinclair Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Required: 1. Allocate the August 2017 joint cost among the three products using the following: a. Physical-measure method b. NRV method 2. Show the operating income for each product using the methods in requirement 1. 3. Discuss the pros and cons of the two methods to Sinclair Oil & Gas for making decisions about product emphasis (pricing, sell-or-process-further decisions, and so on). 4. Draft a letter to the taxation authorities on behalf of Sinclair Oil & Gas that justifies the joint-cost-allocation method you recommend Sinclair use.
Expert Answer:
Related Book For
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan
Posted Date:
Students also viewed these accounting questions
-
A scholarship of $1,855.95 per year is to be paid at the beginning of each year from a scholarship fund of $15,000 invested at 7% compounded annually. How long will the scholarship last if payments...
-
Fingolimod is a novel drug that has recently been developed for the treatment of multiple sclerosis. In April of 2008, researchers reported the results of phase III clinical trials of fingolimod, in...
-
Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsaleable intermediate products: ICR8, ING4, and XGE3. These intermediate products are...
-
At 100C, what is the maximum solubility of the following: (a) Pb in Sn (b) Sn in Pb
-
How does the CRISPR system protect bacteria from phage infection?
-
The nurse is assigned to care for a client who is receiving immune suppressants. The nurse would continually assess the client for which of the following anticipated adverse effects? a. Development...
-
What is the impact of health and safety regulations on the utility of workers and on the profits of firms?
-
1. Does TOMS buy-one-give-one-away model make it a more ethical company than a traditional shoe manufacturer donating money to a charity? Why? 2. Why would customers pay such a high price for a...
-
Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below:...
-
In November 2015, John Wells, a customer service representative of Bayfield Mud Company, was summoned to the Houston warehouse of Wet-Land Drilling, Inc., to inspect three boxcars of mud treating...
-
4. Estimate the parameter A for a statistical sample X1, X2, ..., Xn of independent random varia- bles with the probability densities 1 Px(x) = e-(x-1)/6, x 0. = 6T
-
10. What's wrong with the following code segment? int i,j; String[] names; names[0] = new String("mary"); names[1] = "john"; i = j = names.length; names[0].length();
-
Complete the tables below Shari Robin Medical Community Hospital-FY-2019 Allocation of indirect Costs by Revenue Revenue by Department Pharmacy Laboratory Surgery Home care Emergency Room department...
-
Consider the following cash flows on two mutually exclusive projects with similar risk for the Bahamas Recreation Corporation (BRC). BRC require an annual return of 15 percent. Whic project should...
-
A stock will pay no dividends for the next 9 years. Ten years from now, the stock is expected to pay its first dividend in the amount of $2.9. It is expected to pay a dividend of $3.2 exactly eleven...
-
Supplier A charged a Contract price of nickel cathode for 2021 at US$32/kg and US$60/kg for 2022. whereas supplier B charged Contract price was US$35/kg for 2021 and US$38/kg for 2022. Using...
-
Introduction: what is the report is about and what sections will follow? State the Saas's origins and current situation. List of all the international markets where the company is selling its...
-
Which provision could best be justified as encouraging small business? a. Ordinary loss allowed on $ 1244 stuck. b. Percentage depletion. c. Domestic production activates deductions. d. Interest...
-
The Beach Comber is a take-out food store at a popular beach resort. Sara Miller, owner of the Beach Comber, is deciding how much refrigerator space to devote to four different drinks. Pertinent data...
-
Budgeted performance is a better criterion than past performance for judging managers do you agrees? Explain.
-
Comment on the following statement. In a normal-costing system, the amounts in the Manufacturing Overhead Control account will always equal the amounts in the Manufacturing Overhead Allocated account?
-
Why is it important to pay attention to cultural differences when interviewing a client?
-
What does the term "unauthorized practice of law" mean, and how does it limit your relationship with a client?
-
Why is it important to acknowledge how a client is feeling at the initial interview?
Study smarter with the SolutionInn App