Butry Company Manufactures Veterinary Products

question 9

Multiple Choice

Butry Company manufactures veterinary products. One joint process involves refining a chemical (dactylyte) into two chemicals: dac and tyl. One batch of 5,000 L of dactylyte can be converted to 2,000 L of dac and 3,000 L of tyl at a total joint processing cost of $12,000. At the split-off point, dac can be sold for $3 per litre and tyl can be sold for $4 per litre. Butry has just learned of a new process to convert dac into prodac. The new process costs $4,000 and yields 1,700 L of prodac for every 2,000 L of dac. Prodac sells for $5 per litre.
-Refer to the Figure.Should Butry process dac further or sell now,and what will be the effect on income?

• A)Do not process further, because income will be $5,000 lower.
• B)Do not process further, because income will be $1,500 lower.
• C)Process further, because income will be $1,500 higher.
• D)Process further, because income will be $5,000 higher.

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Definitions:

Advertiser

A person or company that pays to promote their products, services, or ideas through various types of media.

Deceiving

Engaging in acts that mislead or trick others into believing something that is not true.

Multiple-Product Order

A form of cease-and-desist order issued by the FTC that applies not only to a specified product but also to other products produced by the same firm.

Cease-And-Desist Order

An FTC order requiring that a company stop its illegal behavior.