Solved: Farleigh Petroleum Inc is a small company that

acquires high grade

Farleigh Petroleum Inc is a small company that acquires high grade

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 ...... $6,500,000

Direct labor and related costs ....... 1,400,000

Manufacturing overhead ...... 3,000,000

Data on barrels produced and selling price:

Two Oil, 300,000 barrels produced; sales price, $45 per barrel

Six Oil, 170,000 barrels produced; sales price, $25 per barrel

Distillates, 80,000 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.)

2. Calculate the amount of joint production cost that Farleigh Petroleum would allocate to each
of the three joint products by using the relative sales value method. (Carry out the ratio
calculation to four decimal places. Round allocated costs to the nearest dollar.)

Farleigh Petroleum Inc is a small company that acquires high grade

ANSWER
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