Butry Company manufactures veterinary products. One joint process involves refining a chemical (dactylyte) into two chemicals: dac and tyl. One batch of 5,000 L of dactylyte can be converted to 2,000 L of dac and 3,000 L of tyl at a total joint processing cost of $12,000. At the split-off point, dac can be sold for $3 per litre and tyl can be sold for $4 per litre. Butry has just learned of a new process to convert dac into prodac. The new process costs $4,000 and yields 1,700 L of prodac for every 2,000 L of dac. Prodac sells for $5 per litre.
-Refer to the Figure.What is Butry's profit from refining one batch of dactylyte if both dac and tyl are sold at the split-off point?
A)$6,000
B)$7,000
C)$12,000
D)$15,000

Question

Quizplus · Accepted Answer

The profit from refining one batch of dactylyte when both dac and tyl are sold at the split-off point is calculated as follows: Revenue from dac = 2,000 L * $3/L = $6,000. Revenue from tyl = 3,000 L * $4/L = $12,000. Total revenue = $6,000 + $12,000 = $18,000. Total cost = $12,000. Profit = Total revenue - Total cost = $18,000 - $12,000 = $6,000.

Butry Company Manufactures Veterinary Products