A chemical company spent $532,000 to produce 150,000 gallons of a chemical that can be sold for $4.80 per gallon.This chemical can be further processed into a weed killer that can be sold for $8.20 per gallon.It will cost $270,000 to process the chemical into the weed killer.Which of the following is true?

Question

Quizplus · Accepted Answer

First, let's calculate the revenue from selling the chemical as is:
150,000 gallons x $4.80 per gallon = $720,000

Now, let's calculate the revenue from processing the chemical into weed killer:
150,000 gallons x $8.20 per gallon = $1,230,000

However, we need to subtract the cost of processing the chemical into weed killer:
$1,230,000 - $270,000 = $960,000

Now, let's subtract the cost of producing the original chemical from both scenarios to calculate the operating income:

Selling the chemical as is:
$720,000 - $532,000 = $188,000

Processing the chemical into weed killer:
$960,000 - $532,000 = $428,000

Therefore, processing the chemical into weed killer will increase operating income by $240,000 ($428,000 - $188,000). So the correct answer is C.

A Chemical Company Spent $532,000 to Produce 150,000 Gallons of a Chemical