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Could oyu please explain how to find the revenue on guarine and the post-split amount? Thank you Joint products have common processes and costs of
Could oyu please explain how to find the revenue on guarine and the post-split amount? Thank you
Joint products have common processes and costs of production up to a split-off point. At that point, they become distinguishable. For example, certain minerals such as copper and gold may both be found in a given ore. the ore must be mined, crushed, and treated before the copper and gold are separated. the point of separation is called the split-off point. the costs of mining, crushing, and treatment are common to both products. Often, joint products are sold at the split-off point. But sometimes, it is more profitable to process a Joint product beyond the split-off point prior to selling it. the key point is that all of the joint production costs are irrelevant to the sell or process further decision. By the time the split-off point is reached, all joint costs are sunk, and therefore, irrelevant. the only relevant costs are those incurred beyond the split-off point. Enviro-Chem Company processes a number of chemical compounds used in producing reagents for the environmental testing industry. One compound is decomposed into two chemicals: guanine and Petrolane. the cost of processing one batch of compound is $79, 900, and the result is 4, 980 gallons of guanine and 8, 160 gallons of Petrolane. Enviro-Chem Company can sell the guanine at split-off for $13 per gallon and the Petrolane for $9 per gallon. Alternatively, the guanine can be processed further at a cost of $6 per gallon (of guanine) into hydrolyte. It takes 4 gallons of guanine for every gallon of hydrolyte. A gallon of hydrolyte sells for $73. If the guanine is sold at split-off, Enviro-Chem will earn sales revenue on guanine of $. If the guanine is processed further into hydrolyte, Enviro-Chem will earn a net post-split-off amount of $. It is better for Enviro-CChem
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