A Company Processes Chemicals Through a Common Production Process

question 106

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:
(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:

Aniline

An organic compound characterized by a benzene ring attached to an amino group (-NH2).

3-Pentanone

An organic compound and a ketone with the formula CH3COCH2CH2CH3, characterized by a five-carbon chain with a ketone functional group at the second carbon.

Pentanal

An aldehyde with the formula C5H10O, recognizable by its pungent odor.

HCN

Hydrogen cyanide, a highly toxic compound that is a colorless, volatile liquid with a faint, almond-like odor, used in the production of various chemicals.