A chemical company spent $532,000 to produce150,000 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 $9.20 per gallon.It will cost $260,000 to process the chemical into the weed killer.Which of the following is true?

Question

Quizplus · Accepted Answer

Selling the chemical as is would generate $720,000 ($4.80 * 150,000 gallons). Processing it further costs $260,000, but the weed killer can be sold for $1,380,000 ($9.20 * 150,000 gallons). The net increase in operating income from processing further is $400,000 ($1,380,000 - $720,000 - $260,000).

A Chemical Company Spent $532,000 to Produce150,000 Gallons of a Chemical