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:
(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?

Question

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: 
(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?

Quizplus · Accepted Answer

The Answer of 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: 
(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?

A Company Processes Chemicals Through a Common Production Process