hw

Question $6,$ P$8-60$A $($similar to$)$

HW Score: $29\mathrm{.}04\%,4\mathrm{.}65$ of $16$ points

Part $1$ of $3$

Points: $0$ of $3$

Rouse Chemical has spent $$244,000$ to refine $74,000$ gallons of acetone, which can be sold for $$1\mathrm{.}90$ a gallon. Alternatively, Rouse Chemical can process the acetone further. This processing will yield a total of $59,000$ gallons of lacquer thinner that can be sold for $$3\mathrm{.}00$ a gallon. The additional processing will cost $$0\mathrm{.}80$ per gallon of lacquer thinner. To sell the lacquer thinner, Rouse Chemice must pay shipping of $$0\mathrm{.}24$ a gallon and administrative expenses of $$0\mathrm{.}14$ a gallon on the thinner.

Read the requirements.

Requirement $1.$ Identify the sunk cost. Is the sunk cost relevant to Rouse's decision? Why or why not?

The is a sunk cost that differ between alternatives of selling as is or processing further. Consequently, this sunk cost of is to the sell or process further decision.

Requirements

Identify the sunk cost. Is the sunk cost relevant to Rouse's decision? Why or why not?

Should Rouse sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives.

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