Smith Chemical has spent $242,000 to refine 70,000 gallons of acetone, which Requirements can be sold for $2.30 a gallon. Alternatively, Smith Chemical can process the 1. Identify the sunk cost. Is the sunk cost relevant to Smith's decision? Why or acetone further. This processing will yield a total of 63,000 gallons of lacquer why not? thinner that can be sold for $3.30 a gallon. The additional processing will cost $0.75 per gallon of lacquer thinner. To sell the lacquer thinner, Smith Chemical 2. Should Smith sell the acetone as is or process it into lacquer thinner? Show must pay shipping of $0.18 a gallon and administrative expenses of $0.12 a the expected net revenue difference between the two alternatives. gallon on the thinner. Requirement 1. Identify the sunk cost. Is the sunk cost relevant to Smith's decision? Why or why not? The amount spent to refine the acetone is a sunk cost that does not differ between alternatives of selling as is or processing further. Consequently, this sunk cost of $ 242,000 is irrelevant to the sell or process further decision. Requirement 2. Should Smith sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. (Enter a "0" 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 As Is Process Further Difference Sales rever revenue Less: Additional processing costs to convert lacquer thinner Net benefit to operating income per batch