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 $76,000, and the result is 6,500 gallons of anderine and 7,800 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $9.00 per gallon and the dofinol for $6.70 per gallon. Alternatively, the anderine can be processed further at a cost of $7.20 per gallon (of anderine) into cermine. It takes 2 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $62. 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. Process it further by $ 2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 490 gallons of anderine that undergo further processing require 21 more purchase orders at $8 each and 18 more quality inspection hours at $25 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent. Sell at split-off 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 $76,000, and the result is 6,500 gallons of anderine and 7,800 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $9.00 per gallon and the dofinol for $6.70 per gallon. Alternatively, the anderine can be processed further at a cost of $7.20 per gallon (of anderine) into cermine. It takes 2 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $62. 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. Process it further by $ 2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 490 gallons of anderine that undergo further processing require 21 more purchase orders at $8 each and 18 more quality inspection hours at $25 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent. Sell at split-off by $
Chapter1: Financial Statements And Business Decisions
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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 $76,000, and the result is 6,500 gallons of anderine and 7,800 gallons
of dofinol. Betram Chemicals can sell the anderine at split-off for $9.00 per gallon and the dofinol for $6.70 per gallon. Alternatively, the anderine can be
processed further at a cost of $7.20 per gallon (of anderine) into cermine. It takes 2 gallons of anderine for every gallon of cermine. A gallon of cermine sells
for $62.
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.
Process it further by $
2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 490 gallons of anderine that undergo
further processing require 21 more purchase orders at $8 each and 18 more quality inspection hours at $25 each. Which alternative would be better and by
how much?
NOTE: Round interim calculations and your final answer to the nearest cent.
Sell at split-off by $
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