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Drupady [299]
3 years ago
12

Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compou

nd is decomposed into two chemicals: flexalene and soreaphine. The cost of processing one batch of compound is $75,000, and the result is 6,400 gallons of flexalene and 8,000 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $12.00 per gallon and the soreaphine for $6.15 per gallon. Alternatively, the flexalene can be processed further at a cost of $8.40 per gallon (of flexalene) into lactine. It takes 2 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $63.
Required: 1. Which alternative is more cost effective and by how much? NOTE: DO NOT round interim calculations and, if required, round your answer to the nearest dollar. by $ 2. What if the production of flexalene into lactine required additional purchasing and quality inspection activity? Every 550 gallons of flexalene that undergo further processing require 22 more purchase orders at $10 each and 18 more quality inspection hours at $26 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent. by $_______.
Business
1 answer:
nata0808 [166]3 years ago
6 0

Answer:

Vihaan Chemicals Company

1. The more cost-effective alternative is to process Flexalene further into Lactine.  The gain for further processing is $71,040.

2. The better alternative is to process Flexalene further into Lactine.  The gain for further processing is now $63,034.

Explanation:

a) Data and Calculations:

Cost of processing one batch of compound = $75,000

Result of processing the compound:

                                                   Flexalene     Soreaphine

Gallons processed                        6,400            8,000

Split-off selling price per unit     $12.00             $6.15

Further processing cost per gal. $8.40

Selling price of Lactine = $63 per gallon

Sales revenue from Sale of Flexalene at split-off = $76,800

Net Sales revenue from Sale of Lactine after further processing of Flexalene = $147,840 ($63 * 6,400/2) - ($8.40 * 6,400)

Gain from further processing of Flexalene into Lactine = $71,040 ($147,840 - $76,800)

2. Additional costs for further processing:

Purchasing order cost =  $2,560 (6,400/550 * 22 * $10)

Quality inspection cost = $5,446 (6,400/550 * 18 * $26)

Total additional costs =   $8,006

Gain from further processing of Flexalene into Lactine = $63,034 ($147,840 - $76,800 - $8,006)

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Group studying is the best procrastination solution as it breaks the monotonous learning process and it makes you attentive to what the others are saying. Mock tests and trial quizzes assist those struggling with course materials and those extracting tests and quizzes from them as well.

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