The Vista Chemical Company manufactures several chemical compounds.

The manufacturing process in the Cooking Department can be varied to produce different proportions of its two joint products, Bilide and Carlide, at no additional cost. Carlide must be further processed at a cost of $.30 per pound of finished product after separation. Total capacity of the Cooking Department is 10,000 pounds per month. The company can sell up to 8,000 pounds of Bilide each month at $10 per pound. It can also sell up to 4,000 pounds of Carlide for $11.50 per pound. However, because of the manufacturing process used for Carlide after separation, it takes 1.25 pounds of the product at the point of separation to manufacture 1 pound of Carlide. For example, if the company decides to manufacture 4,000 pounds of Carlide, it will require an output of 5,000 pounds of the joint product from the Cooking Department. Common costs for 10,000 pounds of departmental output are shown below.

Materials $40,000 Labor 9,000 Overhead 15,000 1. If the company decides to continue producing both Carlide and Bilide, what will be the gross profit, assuming that the physical units method of allocation is used and the maximum amount of Carlide is produced?
2. If the company decides to produce only Bilide, what will be the gross profit, assuming that the physical units method of allocation is used?
3. Based on gross profit alone, which alternative should the company select?
4. What factors other than gross profit should be considered in deciding whether to continue producing Carlide?