*** Drop Down: sell the guarnine at split off or process guarnine further into rhydrolite

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Sell or Process Further Decisions 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 Example: 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: guarine and petroline. The cost of processing one batch of compound is $83,300, and the result is 3,320 gallons of guarine and 8,520 gallons of petroline. Enviro-Chem Company can sell the guarine at split-off for $16 per gallon and the petroline for $8 per gallon. Alternatively, the guarine can be processed furher at a cost of $4 per gallon (of guarine) into rhydrolite. It takes 4 gallons of guarine for every gallon of rhydrolite. A gallon of rhydrolite sells for $76. If the guarine is sold at split-off, Enviro-Chem will earn sales revenue on guarine of $ of rhydrolite sells for $76. If the guarine is sold at split-off, Enviro-Chem will earn sales revenue on guarine of If the guarine is processed further into rhydrolite, Enviro-Chem will earn a net post-split off amount of It is better for Enviro-Chem Company to -Select your