Vision Chemical has spent $$240,000$ to refine $72,000L$ of acetone, which can be sold for $$\frac{2\mathrm{.}16}{L}.$ Alternatively, Vision Chemical can process the acetone further to yield a total of $60,000L$ of lacquer thinner that can be sold for $$\frac{3\mathrm{.}20}{L}.$ The additional processing will cost $$\frac{0\mathrm{.}62}{L}$ of lacquer thinner. To sell the lacquer thinner, Vision Chemical must pay shipping of $$\frac{0\mathrm{.}22}{L}$ and administrative expenses of $$\frac{0\mathrm{.}10}{L}$ on the thinner.

Requirements

Fill in the diagram for Vision's decision.

Identify the sunk cost. Is the sunk cost relevant to Vision's decision? Why or why not?

Should Vision sell the acetone or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives.

Sell As Is $

Acetone sales revenue

$

Sunk cost of producing $72,000L$ of acetone

Lacquer thinner sales revenue

Requirement $2.$ Identify the sunk cost. Is the sunk cost relevant to Vision's decision? Why or why not?

The $ is a sunk cost that between the alternatives of selling as is or processing further. Consequently, this sunk cost is to the sell$-$or$-$process further decision.