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Sell at split-off or process further

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Sell at split-off or process further:

Adam Chemicals Ltd processes a number of chemical compounds used in producing industrial cleaning products. Compound XL is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of Compound XL is $74,000, and the result is 6,000 gallons of anderine and 8,000 gallons of dofinol. The company can sell the anderine at split-off for $11 per gallon and the dofinol for $6.75 per gallon. Alternatively, the anderine can be processed further at a cost of $8 per gallon of anderine into cermine. It takes 3 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $60.

Required: show all your workings.

I. From a financial perspective, should the company sell the anderine at split-off or process further into cermine?

Reference no: EM132052693

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