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?

Realize the significance of break-even analysis in financial planning.

Identify common mistakes in writing business plans and how to avoid them.

Recognize the importance of professional assistance and resources available for business plan development.

Understand the process of financial projections and their comparison to industry averages.

---

Definitions:

Substitution

The act of replacing one thing with another, especially a similar item, in response to changes in market conditions or personal preferences.

Convex Preferences

In microeconomics, a condition where consumers prefer a mix of goods over having only one good, illustrated by a convex shape of their indifference curves.

Centered

In a general context, it means being in the middle or at the heart of something; in mathematics, it can refer to the process of adjusting data points or a distribution so that its mean equals zero.

Convex Preferences

Refers to a situation in economics where a consumer prefers a mix or combination of goods over having all of one good, demonstrating a desire for diversity in consumption.