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Exxon petrochemical Chapter 6-37 Sell or Process Further

Chapter 6: 6-37, Sell or Process Further
An Exxon petrochemical factory produces two products, L and M, as a result of a particular joint process. Both products are sold to manufacturers as ingredients for assorted chemical products.
Product L sells at split off for $0.25 per gallon. M, for $0.30 per gallon. Data for April follow:
Joint processing cost $1,600,000
Gallons produced and sold
L 4,000,000
M 2,500,000
Suppose that in April the 2,500,000 gallons of M could have been processed further into Super M at an additional cost of $165,000. The Super M output would be sold for $0.36 per gallon. Product L would be sold at split off in any event.
Should M have been processed further in April and sold as Super M? Show your computations.


Solution Summary

Your tutorial is attached (click in cells to see computation). You should not process further. Logic is explained to show you why.