Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $74,000, and the result is 6,200 gallon of anderine and 7,500 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $13.00 per gallon and the dofinol for $6.35 per gallon. Alternatively, the anderine can be processed further at a cost of $7.90 per gallon (of anderine) into cermine. It takes 2 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $59. Required: 1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by s 2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 470 gallons of anderin that undergo further processing require 17 more purchase orders at $8 each and 12 more quality inspection hours at $23 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent. by $
Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $74,000, and the result is 6,200 gallon of anderine and 7,500 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $13.00 per gallon and the dofinol for $6.35 per gallon. Alternatively, the anderine can be processed further at a cost of $7.90 per gallon (of anderine) into cermine. It takes 2 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $59. Required: 1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by s 2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 470 gallons of anderin that undergo further processing require 17 more purchase orders at $8 each and 12 more quality inspection hours at $23 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent. by $
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 64P: Sell or Process Further, Basic Analysis Shenista Inc. produces four products (Alpha, Beta, Gamma,...
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Transcribed Image Text:Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs
Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is
decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $74,000, and the result is 6,200 gallons
of anderine and 7,500 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $13.00 per gallon and the dofinol for $6.35 per
gallon. Alternatively, the anderine can be processed further at a cost of $7.90 per gallon (of anderine) into cermine. It takes 2 gallons of
anderine for every gallon of cermine. A gallon of cermine sells for $59.
Required:
1. Which alternative is more cost effective and by how much?
NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar.
by $
2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 470 gallons of anderine
that undergo further processing require 17 more purchase orders at $8 each and 12 more quality inspection hours at $23 each. Which
alternative would be better and by how much?
NOTE: Round interim calculations and your final answer to the nearest cent.
by $
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