Saudi Aramco is the biggest energy company in the world.

Saudi Aramco produces four products: Gasoline fuel,

Diesel Fuel, Alkylate Gasoline and Residual oils which is sold as raw materials in producing Ammonia.

Gasoline Fuel

Gas Oils Diesel Fuel

Crude Oil Alkylate

Byproduct
Gasoline
Residual Oils

No further
processing

Gasoline fuel, Diesel Fuel and Residual Oils are joint products while Alkylate Gasoline is a byproduct.
Raw Materials used were Crude Oil which processed at Distillation Process cost 1,600,000 and 650,000
conversion cost (JOINT COST) allocated based on Quantity produced.

Raw Materials: Crude Oil: 150,000 Barrels

 Distillation Department processes Crude oil and produces 100,000 barrels of Gas oils and
25,000 barrels of Residual Oils. Joint Cost of 1,600,000 Materials and 650,000 Conversion Cost.
Shrinkage of 25,000 barrels. Residual Oils were sold at Php22.00 per barrels.
 Gas oil was further process in Fluid Cracking Department for 1,000,000 separable costs with
no shrinkage (still 100,000 units). Separable Costs was allocated based on Sales value at split-
off. Gasoline fuel and Diesel Fuel was 54% and 36% of Gas oil processed, sold at Php40.00 and
Php30.00 respectively. 10% was byproducts sell at Php15.00 with further processing in
Alkylating Department which cost Php5.00 to become salable. NRV of Alkylate Gasoline was
deducted to separable cost of Fluid cracking Department. The COST of Gas Oil before further
processing should also be allocated based on NRV of Gasoline and Diesel Fuel to determine the
total cost for two products.

Compute the following:

1. Allocated joint cost to gas oils and Residual oils.

2. Allocated separable cost to gasoline and diesel fuels based on sales value at split-off if NRV of alkylate
gasoline was inventory.
3. Cost per unit and Gross Profit per unit of Gasoline Fuels and Diesel Fuels.
4. Gross profit of Residual oils.
5. If the Gas oils can be sold at Php20.00 per barrel which joint cost was allocated based on quantity
produced, should the manager process it further to gain more profit? Compare Gross margin in No. 3
answer.