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 two to three 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 per cent. For every 1300 kilograms of chemicals used, 600 kilograms of depryl and 600 kilograms 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 kilogram for depryl and $30 per kilogram for pencol. The costs to produce 600 kilograms of each analgesic are as follows: Chemicals Direct labour Overhead The analgesics are packaged in 20-kilogram bags and shipped. The cost of each bag is $1.30. Shipping costs $0.10 per kilogram. $8 500 6 735 9 900 Zanda could process depryl further by grinding it into a fine powder and then moulding the powder into tablets. The tablets can be sold directly to retail pharmacies as a generic brand. If this route were taken, the revenue received per bottle of tablets would be $4.00, with 10 bottles produced from every kilogram of depryl. The costs of grinding and tableting total $2.50 per kilogram 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. Required: 1 2 Should Zanda sell depryl at split-off, or should depryl be processed and sold as tablets? If Zanda normally sells 265 000 kilograms of depryl per year, what will be the difference in profits if depryl is processed 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 two to three 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 per cent. For every 1300 kilograms of chemicals used, 600 kilograms of depryl and 600 kilograms 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 kilogram for depryl and $30 per kilogram for pencol. The costs to produce 600 kilograms of each analgesic are as follows: Chemicals Direct labour Overhead The analgesics are packaged in 20-kilogram bags and shipped. The cost of each bag is $1.30. Shipping costs $0.10 per kilogram. $8 500 6 735 9 900 Zanda could process depryl further by grinding it into a fine powder and then moulding the powder into tablets. The tablets can be sold directly to retail pharmacies as a generic brand. If this route were taken, the revenue received per bottle of tablets would be $4.00, with 10 bottles produced from every kilogram of depryl. The costs of grinding and tableting total $2.50 per kilogram 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. Required: 1 2 Should Zanda sell depryl at split-off, or should depryl be processed and sold as tablets? If Zanda normally sells 265 000 kilograms of depryl per year, what will be the difference in profits if depryl is processed further?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![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 two to three 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 per cent.
For every 1300 kilograms of chemicals used, 600 kilograms of
depryl and 600 kilograms 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 kilogram for
depryl and $30 per kilogram for pencol. The costs to produce
600 kilograms of each analgesic are as follows:
Chemicals
Direct labour
Overhead
The analgesics are packaged in 20-kilogram bags and
shipped. The cost of each bag is $1.30.
Shipping costs $0.10 per kilogram.
$8 500
6 735
9 900
Zanda could process depryl further by grinding it into a
fine powder and then moulding the powder into tablets. The
tablets can be sold directly to retail pharmacies as a generic
brand. If this route were taken, the revenue received per
bottle of tablets would be $4.00, with 10 bottles produced
from every kilogram of depryl. The costs of grinding and
tableting total $2.50 per kilogram 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.
Required:
1
2
Should Zanda sell depryl at split-off, or should depryl
be processed and sold as tablets?
If Zanda normally sells 265 000 kilograms of depryl
per year, what will be the difference in profits if depryl
is processed further?
|](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1c22f934-cc81-4492-8ebd-3f445576851b%2Ffe6311f7-ed09-4517-9a5a-18c3d6bcc93e%2F1x2e9_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 two to three 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 per cent.
For every 1300 kilograms of chemicals used, 600 kilograms of
depryl and 600 kilograms 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 kilogram for
depryl and $30 per kilogram for pencol. The costs to produce
600 kilograms of each analgesic are as follows:
Chemicals
Direct labour
Overhead
The analgesics are packaged in 20-kilogram bags and
shipped. The cost of each bag is $1.30.
Shipping costs $0.10 per kilogram.
$8 500
6 735
9 900
Zanda could process depryl further by grinding it into a
fine powder and then moulding the powder into tablets. The
tablets can be sold directly to retail pharmacies as a generic
brand. If this route were taken, the revenue received per
bottle of tablets would be $4.00, with 10 bottles produced
from every kilogram of depryl. The costs of grinding and
tableting total $2.50 per kilogram 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.
Required:
1
2
Should Zanda sell depryl at split-off, or should depryl
be processed and sold as tablets?
If Zanda normally sells 265 000 kilograms of depryl
per year, what will be the difference in profits if depryl
is processed further?
|
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