Lancastor company manufactures two types of hair

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Lancastor Company manufactures two types of hair conditioners, creemy and shiney, out of a joint production process. The joint costs incurred are $910,000 for a standardd production run that generates 360,000 gallons of creemy and 240,000 gallons of shiney. Additional processing costs beyond the split-off point are $2.80 per gallon for creemy and $1.80 per gallon for shhiney. Creemy sells for $4.80 per gallon while shiney sells for $7.80 per gallon. ABC, Inc., a supermarket chain, has asked Lancaster to supply it with 480,000 gallons of shiney at a price of $7.00 per gallon. ABC plans to have the coonditioner bottled in 16-ounce bottles with its own ABC label. Lancaster will save $0.10 per gallon in the packaging of shiney on the special order. There is sufficient excess capacity for the special order so no regular sales would need to be given up. However, the market for creemy is satturated, and any additional sales of creemy would take place at a price of $3.00 per gallon. Calculate the increase in company profits if Lanccaster Company accepts the special order.

Reference no: EM13608359

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