Geneva Powder Company produces body powders in batches. Each type of powder can be sold in its current condition or processed further and specialized for high-priced department stores. Joint processing costs are $200,000. Data concerning the various products appear below: Type of Powder Number of Pounds Price per Pound at Split-Off Further Processing Costs Price after Processing Further Cosmetic Powder 200,000 $ 10 $ 150,000 $ 11.50 Medicated Powder 400,000 $ 8 $ 60,000 $ 8.40 Baby Powder 50,000 $ 5 $ 80,000 $ 5.50 Required: (a) Determine which products should be sold at split-off and which should be processed further. (b) The Regis Department Store approaches Geneva Powder. Regis would like Geneva Powder to process Baby Powder into a special powder for its infants department. At what price per pound would Geneva Powder be economically indifferent between selling the powder at the split-off point and processing it further for Regis?
Geneva Powder Company produces body powders in batches. Each type of powder can be sold in its current condition or processed further and specialized for high-priced department stores. Joint
|
Type of Powder |
Number of Pounds |
|
Price per Pound |
|
Further Processing Costs |
|
Price after Processing Further |
||||||||
|
Cosmetic Powder |
|
200,000 |
|
|
$ |
10 |
|
|
$ |
150,000 |
|
|
$ |
11.50 |
|
|
Medicated Powder |
|
400,000 |
|
|
$ |
8 |
|
|
$ |
60,000 |
|
|
$ |
8.40 |
|
|
Baby Powder |
|
50,000 |
|
|
$ |
5 |
|
|
$ |
80,000 |
|
|
$ |
5.50 |
|
|
|
Required:
(a) Determine which products should be sold at split-off and which should be processed further.
(b) The Regis Department Store approaches Geneva Powder. Regis would like Geneva Powder to process Baby Powder into a special powder for its infants department. At what price per pound would Geneva Powder be economically indifferent between selling the powder at the split-off point and processing it further for Regis?
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