Problem #3 - split off cost decisions. Once again back at Vandelay Industries which makes latex products. You have spent $60,000 on your latest production run of 6,000 gallons of liquid latex when a customer offers you $84,000 to buy the 6,000 gallons. Normally at this point of production you split off latex and make your three products with further processing - Basic, Special and Sky is the Limit. • You normally use 3,000 gallons for one batch of Basic and additional processing costs are $7,000 per batch and you sell Basic for $17/gallon. • You normally use 2,000 gallons for one batch of Special which requires additional processing costs of $10,500 per batch and you sell Special for $21/gallon • You normally use 1,000 gallons for one batch of Sky is the Limit which requires additional processing costs of $12,000 per batch and you normally sell Sky is the Limit for $27/gallon. Your customer has indicated it is an "all or nothing" offer, you must accept and sell all 6,000 gallons or reject. What should you do if you are wanting to maximize your profits, accept their offer or continue to process? Reject because you would have total profit of $30,500 Accept because you would have a total profit of $84,000 O Accept because you would have a total profit of $22,000 Reject because you would have total profit of $90,500
Problem #3 - split off cost decisions. Once again back at Vandelay Industries which makes latex products. You have spent $60,000 on your latest production run of 6,000 gallons of liquid latex when a customer offers you $84,000 to buy the 6,000 gallons. Normally at this point of production you split off latex and make your three products with further processing - Basic, Special and Sky is the Limit. • You normally use 3,000 gallons for one batch of Basic and additional processing costs are $7,000 per batch and you sell Basic for $17/gallon. • You normally use 2,000 gallons for one batch of Special which requires additional processing costs of $10,500 per batch and you sell Special for $21/gallon • You normally use 1,000 gallons for one batch of Sky is the Limit which requires additional processing costs of $12,000 per batch and you normally sell Sky is the Limit for $27/gallon. Your customer has indicated it is an "all or nothing" offer, you must accept and sell all 6,000 gallons or reject. What should you do if you are wanting to maximize your profits, accept their offer or continue to process? Reject because you would have total profit of $30,500 Accept because you would have a total profit of $84,000 O Accept because you would have a total profit of $22,000 Reject because you would have total profit of $90,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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