A chemical company spent $531,000 to produce 151,000 gallons of a chemical that can be sold for $5.00 per gallon.This chemical can be further processed into a weed killer that can be sold for $8.20 per gallon.It will cost $250,000 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 $755,000 (151,000 gallons * $5.00/gallon). Processing it further would cost $250,000, but the weed killer would sell for $1,238,200 (151,000 gallons * $8.20/gallon). The net increase in operating income from processing further is $233,200 ($1,238,200 - $755,000 - $250,000).

A Chemical Company Spent $531,000 to Produce 151,000 Gallons of a Chemical