Decision : sell as is or process further into cleaner

Smith Petroleum has spent $202,000 to refine 62,000 gallons of petroleum distillate, which can be sold for $6.20 per gallon. Alternatively, Smith can process the distillate further and produce 54,000 gallons of cleaner fluid. The additional processing will cost $1.90 per gallon of distillate. The cleaner fluid can be sold for $9.10 per gallon. To sell cleaner fluid, Smith must pay a sales commission of $0.10 per gallon and a transportation charge of $0.16 per gallon. Read the requirements Requirement 1. Fill in the diagram for Smith's alternatives. Revenues from selling as is i Requirements Joint costs of producing 62,000 gallons of petroleum 1. Fill in the diagram for Smith's alternatives. 2. Identify the sunk cost. Is the sunk cost relevant to Smith's decision? 3. Should Smith sell the petroleum distillate or process it into cleaner fluid? Show the expected net revenue difference between the two alternatives. distillate Cost of Print Done processing further Revenues from processing further Requirement 2. Identify the sunk cost. Is the sunk cost relevant to Smith's decision? v is a sunk cost that differ between the alternatives of selling as is or processing further. Consequently, this sunk cost is The to the sell-or-process-further decision. Requirement 3. Should Smith sell the petroleum distillate or process it into cleaner fluid? Show the expected net revenue difference between the two alternatives. (Enter decreases to profits with a parentheses or minus sign. For the difference in total net revenue, use a parentheses or a minus sign if processing further will decrease total net revenue.) Process Sell As Is Further Difference Expected revenue from selling 62,000 gallons of petroleum distillate Expected revenue from selling 54.000 gallons of cleaner fluid Additional costs of processing Total net revenue