Question

m o Preston Petroleum has spent $203,000 to refine 62 000 gallons of petroleum istatewhich can be said for $8 30 person. Arnavy Pono cleaner Mud The additional processing will cost $1. per gallon of distillate. The cleaner fluid can be sold for $10 per gallon. To sell cheaner Preston mu transportation charge of $0.17 per gallon y com and e of $0.11 and Read the requirements Requirement 1. Fin the diagram for Preston's a matives Revenus from Joint costs of producing 62000 petroleum Cost of Revonuestrom processing further processing further

Answer 1

Solution 1:

Joint cost of producing 62000 gallons of petroleum distillate = $203,000

Revenue from selling as is = 62000*$6.30 = $390,600

Cost of processing further = ($1.90 +$0.11 +$0.17)*55000 = $119,900

Revenue from processing further = 55000*$9.10 = $500,500

Solution 2:

The $203,000 spent to refine the petroleum distillate is sunk Cost that does not differ between alternatives of selling as is or processing further. Consequently, this sink cost is irrelevant to the sell or process further decision.

Solution 3:

E G Н 15 16 17 Smith Chemical 18 Process Further Difference 19 Sell As is Expected revenue from selling 62000 gallons of petroleum distillate Expected revenue from selling 55000 gallons of cleaner fluid Less: Additional cost of proce ssing $390,600 20 $500,500 $109,900 21 22 $119,900 $119.900 Total net revenue $390,600 $380,600 -$10,000 23 24 25 26 27 28 29 30 31 32. 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 5) Sheet 709 She Sheet8 (2) Sheet707 Sheet714