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 $79,000, and the result is 5,900 gallons of flexalene and 8,500 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $11.00 per gallon and the soreaphine for $6.65 per gallon. Alternatively, the flexalene can be processed further at a cost of $7.10 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $56. Required: 1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round the answer to the nearest dollar. by $fill in the blank 2 2. What if the production of flexalene into lactine required additional purchasing and quality inspection activity? Every 450 gallons of flexalene that undergo further processing require 20 more purchase orders at $11 each and 14 more quality inspection hours at $28 each. Which alternative would be better and by how much? NOTE: Round interim calculations and the final answer to the nearest cent.
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 $79,000, and the result is 5,900 gallons of flexalene and 8,500 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $11.00 per gallon and the soreaphine for $6.65 per gallon. Alternatively, the flexalene can be processed further at a cost of $7.10 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $56.
Required:
1. Which alternative is more cost effective and by how much?
NOTE: Do NOT round interim calculations and, if required, round the answer to the nearest dollar.
by $fill in the blank 2
2. What if the production of flexalene into lactine required additional purchasing and quality inspection activity? Every 450 gallons of flexalene that undergo further processing require 20 more purchase orders at $11 each and 14 more quality inspection hours at $28 each. Which alternative would be better and by how much?
NOTE: Round interim calculations and the final answer to the nearest cent.
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