Reference no: EM131211188
Petro-Chem 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. Petro-Chem 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 inventories of finished goods or work-in-process on November 1. The production costs and output of Petro-Chem for November are as follows:
Crude oil acquired and placed in production: $5,000,000
Direct labor and related costs: $2,000,000
Factory overhead: $3,000,000
Production and sales:
Two Oil, 300,000 barrels produced; 80,000 barrels sold at $20 each.
Six Oil, 240,000 barrels produced; 120,000 barrels sold at $30 each.
Distillates, 120,000 barrels produced and sold at $15 per barrel.
The portion of the joint production costs assigned to Two Oil based upon the relative sales value of output would be
A. $2,500,000
B. $4,000,000
C. $2,286,000
D. $4,800,000
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