The company is considering selling the 5,000 gallons of Y directly at the split-off point for a total of $34,000 instead of further processing it. In the plant space used for further processing Y, Chemical Z can be processed even further to produce Z1. The 10,000 gallons of Z1 produced can be sold for $75,000. Additional costs of $38,000 will be incurred to produce Z1. What would you advise management? Support your answer with computations.

Cracker Refining Company produces 3 different chemicals: X, Y and Z. A batch costing $23,750 produces the following: Chemicals Gallons Produced Unit Sales Price x 12,500 5,000 10,000 Additional Cost beyond split-off $10,000 5,000 15,000 $4.00 8.00 3.50 z