Answer: $1,400,000
Explanation:
Joint cost = $1,800,000
Further processing cost(Gasoline) =$100,000
Further processing cost(kerosene) =$200,000
Price of gasoline = $4 per gallon
Price of kerosene = $3.50 per gallon
Processed gasoline in May = 500,000
Processed kerosene in May = 600,000
Allocation of joint cost(Gasoline) = (Total cost × share ratio)
Share ratio = further processing cost of component ÷ total further processing cost
[$1,800,000 × ( 100000 ÷ 300000)]
($1,800,000 × 0.33333333) = 599,999.999
Net realizable value = (Final sales price - processing cost)
[ $(500,000×4) - $600,000]
$2,000,000 - $600,000
$1,400,000
Production cost of gasoline is $1,400,000
