Molo Oil Company produces gasoline, home heating oil, and jet fuel from crude oil in a...
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Molo Oil Company produces gasoline, home heating oil, and jet fuel from crude oil in a joint processing operation. Joint processing costs up to the split-off point total $360,000 per month. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows: Monthly Output 13,400 gallons Selling Price Product Gasoline $22.00 per gallon Heating $16.00 per gallon 20,900 gallona oil Jet Puel $28.00 per gallon 4,600 gallons Each product can be processed further after the split-off point. Additional processing requires no special facilities. The aditional processing costs (per quarter) and unit selling prices after further processing are given below: ces Additional Processing Costa $ 75,970 Selling Price Product Gasoline Heating oil Jet Fuel $27.30 per gallon $109,395 $22.30 per gallon $ 48,260 $36.30 per gallon Required: 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further? Required 1 Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point Home Gasoline Jet Fuel Heating Oll Financial advantage (disadvantage) of further processing Required 1 Required 2 > Required 1 Required 2 Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which produ- products should be processed further? Home Gasoline Jet Fuel Heating ll Sell at split-off point? Process further? Molo Oil Company produces gasoline, home heating oil, and jet fuel from crude oil in a joint processing operation. Joint processing costs up to the split-off point total $360,000 per month. For financial reporting purposes, the company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows: Monthly Output 13,400 gallons Selling Price Product Gasoline $22.00 per gallon Heating $16.00 per gallon 20,900 gallona oil Jet Puel $28.00 per gallon 4,600 gallons Each product can be processed further after the split-off point. Additional processing requires no special facilities. The aditional processing costs (per quarter) and unit selling prices after further processing are given below: ces Additional Processing Costa $ 75,970 Selling Price Product Gasoline Heating oil Jet Fuel $27.30 per gallon $109,395 $22.30 per gallon $ 48,260 $36.30 per gallon Required: 1. What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point? 2. Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which product or products should be processed further? Required 1 Required 2 What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point Home Gasoline Jet Fuel Heating Oll Financial advantage (disadvantage) of further processing Required 1 Required 2 > Required 1 Required 2 Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which produ- products should be processed further? Home Gasoline Jet Fuel Heating ll Sell at split-off point? Process further?
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Related Book For
Managerial Economics and Strategy
ISBN: 978-0321566447
1st edition
Authors: Jeffrey M. Perloff, James A. Brander
Posted Date:
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