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Sell or Process Further
Port Allen Chemical Company processes raw material D into joint products E and F. Raw material D costs $4 per liter. It costs $100 to convert 100 liters of D into 60 liters of E and 40 liters of F. Product F can be sold immediately for $4 per liter or processed further into Product G at an additional cost of $6 per liter. Product G can then be sold for $14 per liter.
Determine whether Product F should be sold or processed further into Product G. Calculate the net benefit (cost) of further processing.
answer ___ per liter

Respuesta :

Answer:

$4 per liter

Explanation:

For computing the net benefit, first, we have to compute the incremental revenue and then deduct the incremental cost, so that the net benefit could find out

The incremental revenue would be

= Selling price per liter of Product G -  Selling price per liter of Product F

= $14 - $4

= $10 per liter

And, the additional cost for processed further into Product G from Product F is $6 per liter

Now put these price to the above formula  

So, the net benefit would equal to

= $10 per liter - $6 per liter

= $4 per liter

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