Port Allen Chemical Company processes raw material D into joint products E and F
ID: 2464604 • Letter: P
Question
Port Allen Chemical Company processes raw material D into joint products E and F. Raw material D costs $6 per liter. It costs $100 to convert 100 liters of D into 60 liters of E and 40 liters of F. Product F can be sold immediately for $6 per liter or processed further into Product G at an additional cost of $5 per liter. Product G can then be sold for $13 per liter.
Determine whether Product F should be sold or processed further into Product G. Calculate the net benefit (cost) of further processing.
Explanation / Answer
Statement showing computations Particulars Amount Sale Value if processed Further = 60*13 780.00 Cost of Further Processing= 60*5 300.00 Net proceeds from further processing = 780- 300 480.00 Proceeds from selling as it is = 60*6 360.00 net benefit (cost) of further processing = 480 -360 120.00 Thus Product F should be processed further into Product G