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o Root Chemical has spent $244,000 to refine 74,000 gallons of acetone, which can be sold for $2.40 a gallon. Alternatively, Root Chemical can process

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o Root Chemical has spent $244,000 to refine 74,000 gallons of acetone, which can be sold for $2.40 a gallon. Alternatively, Root Chemical can process the acetone further. This processing will yield a total of 65,000 gallons of lacquer thinner that can be sold for $3.10 a gallion. The additional processing will cost $0.75 per gallon of lacquer thinner. To sell the lacquer thinner, Root Chemical must pay shipping of $0.22 a gallon and administrative expenses of $0.15 a gallon on the thinner. Requirements 1. Identify the sunk cost. Is the sunk cost relevant to Root's decision? Why or why not? 2. Should Root sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. Requirement 1. Identify the sunk cost. Is the sunk cost relevant to Root's decision? Why or why not? is a sunk cost The that differ between alternatives of selling as is or processing further. Consequently, this sunk cost of to the sell or process further decision Requirement 2. Should Root sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. (Enter ad" for any zero amounts. Use a minus sign or parentheses in the Difference column if the Sell As is amount exceeds the Process Further amount) Sell Process Asis Further Difference Less Net benefit to operating income per batch Decision Sell Process As Is Further Less: Net benefit to operating income per batch Decision: Sell acetone as is. Process further into lacquer thinner

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