Farleigh Petroleum, Inc., is a small company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Farleigh Petroleum does not have the technology or capacity to process these products further and sells most of its output each month to major refineries. There were no beginning finished goods or work-in-process inventories on April 1. The production costs and output of Farleigh Petroleum for April are as follows: Crude oil placed into production Direct labor and related costs Manufacturing overhead Data on barrels produced and selling price: $6,400,000 1,500,000 3,000,000 Two Oil, 300,000 barrels produced; sales price, $45 per barrel Six Oil, 180,000 barrels produced; sales price, $25 per barrel Distillates, 90,000 barrels produced; sales price, $14 per barrel Required: 1. Calculate the amount of joint production cost that Farleigh Petroleum would allocate to each of the three joint products by using the physical units method. (Carry out the ratio calculation to four decimal places. Round allocated costs to the nearest dollar.) Allocated Joint Cost Two Oil Six Oil Distillates Total 5,736,670 3,442,220 1,721,110 10,900,000 ✓
Farleigh Petroleum, Inc., is a small company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Farleigh Petroleum does not have the technology or capacity to process these products further and sells most of its output each month to major refineries. There were no beginning finished goods or work-in-process inventories on April 1. The production costs and output of Farleigh Petroleum for April are as follows: Crude oil placed into production Direct labor and related costs Manufacturing overhead Data on barrels produced and selling price: $6,400,000 1,500,000 3,000,000 Two Oil, 300,000 barrels produced; sales price, $45 per barrel Six Oil, 180,000 barrels produced; sales price, $25 per barrel Distillates, 90,000 barrels produced; sales price, $14 per barrel Required: 1. Calculate the amount of joint production cost that Farleigh Petroleum would allocate to each of the three joint products by using the physical units method. (Carry out the ratio calculation to four decimal places. Round allocated costs to the nearest dollar.) Allocated Joint Cost Two Oil Six Oil Distillates Total 5,736,670 3,442,220 1,721,110 10,900,000 ✓
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Farleigh Petroleum, Inc., is a small company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and
impure distillates. Farleigh Petroleum does not have the technology or capacity to process these products further and sells most of its output each month to major refineries. There were no beginning finished goods or work-in-process
inventories on April 1. The production costs and output of Farleigh Petroleum for April are as follows:
Crude oil placed into production
Direct labor and related costs
Manufacturing overhead
Data on barrels produced and selling price:
$6,400,000
1,500,000
3,000,000
Two Oil, 300,000 barrels produced; sales price, $45 per barrel
Six Oil, 180,000 barrels produced; sales price, $25 per barrel
Distillates, 90,000 barrels produced; sales price, $14 per barrel
Required:
1. Calculate the amount of joint production cost that Farleigh Petroleum would allocate to each of the three joint products by using the physical units method. (Carry out the ratio calculation to four decimal places. Round
allocated costs to the nearest dollar.)
Allocated
Joint Cost
Two Oil
Six Oil
Distillates
Total
5,736,670
3,442,220
1,721,110
10,900,000 ✓
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