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

question 55

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:
$\begin{array}{lrrrr}&&\text { Unit Sales } & \text { Unit Sales } & \\&&\text { Price per } & \text { Price per } & \\&&\text { Pound } & \text { Pound } & \text { Additional } \\&&\text { at Split-Off } & \text { after Further } & \text { Processing }\\ \text { Product}&\text { Volume }&\text {Point}&\text { Processing }&\text {Costs }\\ \text { A } & 25,000 \mathrm{~g} & \$ 35.00 & \$ 54.00 & \$ 500,000 \\\text { B } & 12,000 \mathrm{~g} & 12.00 & 36.00 & 124,000 \\& & & & \\\text { C } & 8,000 \mathrm{~g} & 36.00 & 54.00 & 120,000 \\\text { D } & 2,000 \mathrm{~g} & 12.00 & 21.00 & 25,000\end{array}$

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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Definitions:

Negative Slope

A downward slope indicating an inverse relationship between two variables, where an increase in one correlates with a decrease in the other.

Xy Axis

Refers to the two-dimensional coordinate system formed by the intersection of the x-axis (horizontal) and y-axis (vertical), used for graphing equations or data points.

Phi Coefficient

A measure of the degree of association between two binary variables, ranging from -1 to 1.

Coefficient of Determination

A statistical measure, often denoted as R^2, that represents the proportion of variance for a dependent variable that's explained by one or more independent variables.