Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals: flexalene and soreaphine. The cost of processing one batch of compound is $78,000, and the result is 6,500 gallons of flexalene and 7,600 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $11.00 per gallon and the soreaphine for $5.80 per gallon. Alternatively, the flexalene can be processed further at a cost of $7.60 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $64. 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 flexalene into lactine required additional purchasing and quality inspection activity? Every 550 gallons of flexalene that undergo further processing require 22 more purchase orders at $10 each and 18 more quality inspection hours at $26 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 Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals: flexalene and soreaphine. The cost of processing one batch of compound is $78,000, and the result is 6,500 gallons of flexalene and 7,600 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $11.00 per gallon and the soreaphine for $5.80 per gallon. Alternatively, the flexalene can be processed further at a cost of $7.60 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $64. 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 flexalene into lactine required additional purchasing and quality inspection activity? Every 550 gallons of flexalene that undergo further processing require 22 more purchase orders at $10 each and 18 more quality inspection hours at $26 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent. by $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs
Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals:
flexalene and soreaphine. The cost of processing one batch of compound is $78,000, and the result is 6,500 gallons of flexalene and 7,600 gallons of soreaphine. Vihaan
Chemicals can sell the flexalene at split-off for $11.00 per gallon and the soreaphine for $5.80 per gallon. Alternatively, the flexalene can be processed further at a cost of $7.60
per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $64.
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 flexalene into lactine required additional purchasing and quality inspection activity? Every 550 gallons of flexalene that undergo further processing
require 22 more purchase orders at $10 each and 18 more quality inspection hours at $26 each. Which alternative would be better and by how much?
NOTE: Round interim calculations and your final answer to the nearest cent.
by $
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education