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 $74,000, and the result is 6,000 gallons of anderine and 7,700 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $11.00 per gallon and the dofinol for $5.50 per gallon. Alternatively, the anderine can be processed further at a cost of $7.90 per gallon (of anderine) into cermine. It takes 4 gallons of anderine for every gallon of cermine. A gallon of cermine 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 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 590 gallons of anderine that undergo further processing require 20 more purchase orders at $10 each and 15 more quality inspection hours at $22 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 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 $74,000, and the result is 6,000 gallons of anderine and 7,700 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $11.00 per gallon and the dofinol for $5.50 per gallon. Alternatively, the anderine can be processed further at a cost of $7.90 per gallon (of anderine) into cermine. It takes 4 gallons of anderine for every gallon of cermine. A gallon of cermine 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 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 590 gallons of anderine that undergo further processing require 20 more purchase orders at $10 each and 15 more quality inspection hours at $22 each. Which alternative would be better and by how much?
NOTE: Round interim calculations and your final answer to the nearest cent.
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