urther Decision, Alternatives, Relevant Costs
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 6,100 gallons of anderine and 8,500 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $9.00 per gallon and the dofinol for $5.65 per gallon. Alternatively, the anderine can be processed further at a cost of $8.50 per gallon (of anderine) into cermine. It takes 3 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.
by $
2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 470 gallons of anderine that undergo further processing require 19 more purchase orders at $12 each and 16 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.
by $
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