Sell or Process Further Zanda Drug Corporation buys three chemicals that are processed to produce two types of analgesics used as ingredients for popular over-the- counter drugs. The purchased chemicals are blended for 2 to 3 hours and then heated for 15 minutes. The results of the process are two separate analgesics, depryl and pencol, which are sent to a drying room until their moisture content is reduced to 6 to 8%. For every 1,300 pounds of chemicals used, 600 pounds of depryl and 600 pounds of pencol are produced. After drying, depryl and pencol are sold to companies that process them into their final form. The selling prices are $12 per pound for depryl and $30 per pound for pencol. The costs to produce 600 pounds of each analgesic are as follows: Chemicals $8,500 Direct labor 6,735 Overhead 9,900 The analgesics are packaged in 20-pound bags and shipped. The cost of each bag is $1.30. Shipping costs $0.10 per pound. Zanda could process depryl further by grinding it into a fine powder and then molding the powder into tablets. The tablets can be sold directly to retail drug stores as a generic brand. If this route were taken, the revenue received per bottle of tablets would be $4.00, with 10 bottles produced by every pound of depryl. The costs of grinding and tableting total $2.50 per pound of depryl. Bottles cost $0.40 each. Bottles are shipped in boxes that hold 25 bottles at a shipping cost of $1.60 per box.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question

1. Complete the following comparison alternatives. 

Per 600 pounds        Process Further     Sell     Difference

Revenues

Bags 

Shipping 

Grinding

Bottles 

    Totals

2. Should Zanda sell depryl at split-off, or should depryl be processed and sold as tablets and why. 

3. If Zanda normally sells 265,000 pounds of depryl per year, what will be the difference in profits, in dollars, if depryl is processed further? 

 

Sell or Process Further
Zanda Drug Corporation buys three chemicals that are processed to
produce two types of analgesics used as ingredients for popular over-the-
counter drugs. The purchased chemicals are blended for 2 to 3 hours and
then heated for 15 minutes. The results of the process are two separate
analgesics, depryl and pencol, which are sent to a drying room until
their moisture content is reduced to 6 to 8%. For every 1,300 pounds of
chemicals used, 600 pounds of depryl and 600 pounds of pencol are
produced. After drying, depryl and pencol are sold to companies that
process them into their final form. The selling prices are $12 per pound
for depryl and $30 per pound for pencol. The costs to produce 600
pounds of each analgesic are as follows:
Chemicals
$8,500
Direct labor
6,735
Overhead
9,900
Transcribed Image Text:Sell or Process Further Zanda Drug Corporation buys three chemicals that are processed to produce two types of analgesics used as ingredients for popular over-the- counter drugs. The purchased chemicals are blended for 2 to 3 hours and then heated for 15 minutes. The results of the process are two separate analgesics, depryl and pencol, which are sent to a drying room until their moisture content is reduced to 6 to 8%. For every 1,300 pounds of chemicals used, 600 pounds of depryl and 600 pounds of pencol are produced. After drying, depryl and pencol are sold to companies that process them into their final form. The selling prices are $12 per pound for depryl and $30 per pound for pencol. The costs to produce 600 pounds of each analgesic are as follows: Chemicals $8,500 Direct labor 6,735 Overhead 9,900
The analgesics are packaged in 20-pound bags and shipped. The cost of
each bag is $1.30. Shipping costs $0.10 per pound.
Zanda could process depryl further by grinding it into a fine powder and
then molding the powder into tablets. The tablets can be sold directly to
retail drug stores as a generic brand. If this route were taken, the
revenue received per bottle of tablets would be $4.00, with 10 bottles
produced by every pound of depryl. The costs of grinding and tableting
total $2.50 per pound of depryl. Bottles cost $0.40 each. Bottles are
shipped in boxes that hold 25 bottles at a shipping cost of $1.60 per box.
Transcribed Image Text:The analgesics are packaged in 20-pound bags and shipped. The cost of each bag is $1.30. Shipping costs $0.10 per pound. Zanda could process depryl further by grinding it into a fine powder and then molding the powder into tablets. The tablets can be sold directly to retail drug stores as a generic brand. If this route were taken, the revenue received per bottle of tablets would be $4.00, with 10 bottles produced by every pound of depryl. The costs of grinding and tableting total $2.50 per pound of depryl. Bottles cost $0.40 each. Bottles are shipped in boxes that hold 25 bottles at a shipping cost of $1.60 per box.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Knowledge Booster
Cost volume profit (CVP) analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education