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A Company Processes Chemicals Through a Common Production Process ACalculate the Incremental Profit or Loss That Would Be Generated

Question 114

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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:
 Unit Sales  Unit Sales  Price per  Price per  Pound  Pound  Additional  at Split-Off  after Further  Processing  Product Volume Point Processing Costs  A 25,000 g$35.00$54.00$500,000 B 12,000 g12.0036.00124,000 C 8,000 g36.0054.00120,000 D 2,000 g12.0021.0025,000\begin{array}{lrrrr}&&\text { Unit Sales } & \text { Unit Sales } & \\&&\text { Price per } & \text { Price per } & \\&&\text { Pound } & \text { Pound } & \text { Additional } \\&&\text { at Split-Off } & \text { after Further } & \text { Processing }\\ \text { Product}&\text { Volume }&\text {Point}&\text { Processing }&\text {Costs }\\ \text { A } & 25,000 \mathrm{~g} & \$ 35.00 & \$ 54.00 & \$ 500,000 \\\text { B } & 12,000 \mathrm{~g} & 12.00 & 36.00 & 124,000 \\& & & & \\\text { C } & 8,000 \mathrm{~g} & 36.00 & 54.00 & 120,000 \\\text { D } & 2,000 \mathrm{~g} & 12.00 & 21.00 & 25,000\end{array}

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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