A Company Processes Chemicals Through a Common Production Process ACalculate the Incremental Profit or Loss That Would Be Generated

question 40

Essay

A company processes chemicals through a common production process.This process costs $200,000 each year.The four chemicals can be sold when they emerge from this process at the "split-off point," or processed further and then sold.Data about the four products for the coming period are:
$\begin{array}{lrrrr}&&\text { Unit Sales } & \text { Unit Sales } & \\&&\text { Price per } & \text { Price per } & \\&&\text { Gallon } & \text { Gallon after } & \text { Additional } \\&&\text { at Split-Off } & \text { Further } & \text { Processing } \\\underline { \text { Product } }&\underline { \text { Volume } }&\underline {\text { Point } }&\underline { \text { Processing }} & \underline {\text { Costs} }\\\mathrm{A} & 25,000 \mathrm{~g} & \$ 35.00 & \$ 54.00 & \$ 500,000 \\\mathrm{~B} & 12,000 \mathrm{~g} & 12.00 & 36.00 & 124,000 \\\\\mathrm{C} & 8,000 \mathrm{~g} & 36.00 & 54.00 & 120,000 \\\mathrm{D} & 2,000 \mathrm{~g} & 12.00 & 21.00 & 25,000\end{array}$ a.Calculate the incremental profit or loss that would be generated by processing these chemicals further.
b.Which chemicals should be sold as is and which should be processed further and why?

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