Root Petroleum has spent $203,000 to refine 61,000 gallons of petroleum distillate, which can be sold for $6.20 per gallon. Alternatively, Root can process the distillate further and produce 55,000 gallons of cleaner fluid. The additional processing will cost $1.70 per gallon of distillate.

The cleaner fluid can be sold for $9.20 per gallon. To sell cleaner fluid, Root must pay a sales commission of $0.14 per gallon and a transportation charge of $0.15 per gallon.

Root Petroleum has spent $203,000 to refine 61,000 gallons of petroleum distillate, which can be sold for $6.20 per gallon. Alternatively, Root can process the distillate further and produce 55,000 gallons of cleaner fluid. The additional processing will cost $1.70 per gallon of distillate. The cleaner fluid can be sold for $9.20 per gallon. To sell cleaner fluid, Root must pay a sales commission of $0.14 per gallon and a transportation charge of $0.15 per gallon. Read the requirements Requirement 1. Fill in the diagram for Root's alternatives. Revenues from selling as is Joint costs of producing 61,000 gallons of petroleum distillate Cost of Revenues from $ processing processing further further Root Petroleum has spent $203,000 to refine 61,000 gallons of petroleum distillate, which can be sold for $6.20 per gallon. Alternatively, Root can process the distillate further and produce 55,000 gallons of cleaner fluid. The additional processing will cost $1.70 per gallon of distillate. The cleaner fluid can be sold for $9.20 per gallon. To sell cleaner fluid, Root must pay a sales commission of $0.14 per gallon and a transportation charge of $0.15 per gallon. Read the requirements. Requirement 2. Identify the sunk cost. Is the sunk cost relevant to Root's decision? The $119, 650 cost of further processing is a sunk cost that Does y differ between the alternatives of selling as is or processing further. Consequently, this sunk cost is Relevant to the sell-or-process-further decision. $203,000 spent to refine the petroleum distillate Does not Irrelevant Requirement 3. Should Root 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 61,000 gallons of petroleum distillate Expected revenue from selling 55,000 gallons of cleaner fluid Additional costs of processing Total net revenue Decision: Sell as is Process further as cleaner Enter any number in the edit fields and then continue to the next