Question
ABC Company manufactures veterinary products. One joint process involves refining a chemical (dactylyte) into two chemical, dac and tyl. One batch of 5,000 gallons of
ABC Company manufactures veterinary products. One joint process involves refining a chemical (dactylyte) into two chemical, dac and tyl. One batch of 5,000 gallons of dactylyte can be converted to 2,000 gallons of dac and 3,000 gallons of tyl at a total joint processing cost of P12,000. At the split off point, dac can be sold for P3 per gallon and tyl can be sold for P4 per gallon. ABC has just learned of a new process to convert dac into prodac. The new process costs P4,000 and yields 1,700 gallons of prodac for every 2,000 gallons of dac. Prodac sells for P5 per gallon.
Should ABC process dac further? Why?
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