Requirement 2. Identify the sunk cost. Is the sunk cost relevant to Castillo's decision? The is a sunk cost that differ between the alternatives of selling as is or processing further. Consequently, this sunk cost is decision. 7 to the sell-or-process-further Requirement 3. Should Castillo sell the petroleum distillate or process it into cleaner fluid? Show the expected net revenue difference between the two alternatives. (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 56,000 gallons of cleaner fluid Additional costs of processing Total net revenue Decision: Castillo Petroleum has spent $200,000 to refine 62,000 gallons of petroleum distillate, which can be sold for $6.40 per gallon. Alternatively, Castillo can process the distillate further and produce 56,000 gallons of cleaner fluid. The additional processing will cost $1.75 per gallon of distillate. The cleaner fluid can be sold for $9.30 per gallon. To sell cleaner fluid, Castillo must pay a sales commission of $0.10 per gallon and a transportation charge of $0.18 per gallon Read the requirements. Requirement 1. Fill in the diagram for Castillo's alternatives. X Revenues from Requirements selling as is Joint costs 1. Fill in the diagram for Castillo's alternatives. 2. Identify the sunk cost. Is the sunk cost relevant to Castillo's decision? 3. Should Castillo sell the petroleum distillate or process it into cleaner fluid? Show the expected net revenue difference between the two alternatives. of producing 62,000 gallons of petroleum distillate Cost of Revenues from Print Done $ -- processing further processing further