Noble Chemical has spent $240,000 to refine 71,000 gallons of​ acetone, which can be sold for $2.30 a gallon.​ Alternatively, Noble Chemical can process the acetone further. This processing will yield a total of 59,000 gallons of lacquer thinner that can be sold for $3.20 a gallon. The additional processing will cost $0.85 per gallon of lacquer thinner. To sell the lacquer​ thinner, Noble Chemical must pay shipping of $0.24 a gallon and administrative expenses of $0.12 a gallon on the thinner.     Requirements: 1. Identify the sunk cost. Is the sunk cost relevant to Noble​'s ​decision? Why or why​ not? 2. Should Noblesell the acetone as is or process it into lacquer​ thinner? Show the expected net revenue difference between the two alternatives.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Noble Chemical has spent $240,000 to refine 71,000 gallons of​ acetone, which can be sold for $2.30 a gallon.​ Alternatively,
Noble Chemical can process the acetone further. This processing will yield a total of 59,000 gallons of lacquer thinner that can be sold for $3.20 a gallon. The additional processing will cost $0.85 per gallon of lacquer thinner. To sell the lacquer​ thinner, Noble Chemical must pay shipping of $0.24 a gallon and administrative expenses of $0.12 a gallon on the thinner.
 
 
Requirements:
1.
Identify the sunk cost. Is the sunk cost relevant to Noble​'s ​decision? Why or why​ not?
2.
Should Noblesell the acetone as is or process it into lacquer​ thinner? Show the expected net revenue difference between the two alternatives.
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