A chemical company spent $530,000 to produce 150,000 gallons of a chemical, which can be sold for $5.20 per gallon. The chemical can be further processed into a weed killer which can be sold for $7.20 per gallon; it will cost $270,000 to process the chemical into a weed killer. Which of the following is true?

Question

Quizplus · Accepted Answer

The additional revenue from processing is $2.00 per gallon ($7.20 - $5.20), totaling $300,000 (150,000 gallons x $2.00). The additional cost is $270,000, resulting in a net increase in operating income of $30,000 ($300,000 - $270,000).

A Chemical Company Spent $530,000 to Produce 150,000 Gallons of a Chemical