Answer (B) is correct . The total production costs incurred are $10,000,000, consisting of crude oil of $5,000,000, direct labor of $2,000,000, and manufacturing overhead of $3,000,000. The total value of the output is as follows: Two Oil (300,000 barrels*$20) $ 6,000,000 Six Oil (240,000 barrels *$30) 7,200,000 Distillates (120,000 barrels*$15) 1,800,000 Total sales value $15,000,000. 6000/15000*10000=4000.
Answer (A) is incorrect because The amount of $4,800,000 is the amount that would be assigned to Six Oil.
Answer (C) is incorrect because The amount of $2,286,000 is based on the relative sales value of units sold.
Answer (D) is incorrect because The amount of $2,500,000 is based on the physical quantity of barrels sold.
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The portion of Petro-Chem’s joint production costs assigned to Two Oil based upon the relative sales value of output would be
