Question

Bergamit Company manufactures veterinary products. One joint process involves refining a chemical (dactylyte) into two chemicals: dac and tyl. One batch of 10,000 gallons of dactylyte can be converted to 4,000 gallons of dac and 6,000 gallons of tyl at a total joint processing cost of $15,000. At the split-off point, dac can be sold for $5 per gallon and tyl can be sold for $7 per gallon. Bergamit has just learned about a new process to convert dac into prodac. The new process costs $5,000 and yields 2,500 gallons of prodac for every 3,000 gallons of dac. Prodac sells for $6 per gallon. What is Bergamit's profit from refining one batch of dactylyte if both dac and tyl are sold at the split-off point? a. $25,000 b. $17,000 c. $52,000 d. $36,000 e. $47,000

Answer 1

Revenue from sale of Dac	20000	=4000*5
Revenue from sale of Tyl	42000	=6000*7
Less: Total joint processing costs	-15000
Profit from refining one batch of dactylyte	47000
Option E $47,000 is correct