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    Exxon petrochemical Chapter 6-37 Sell or Process Further

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    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.

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    Solution Summary

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