Question

BioMorphs Corporation produces three products in a monthly joint production process. During the first stage of the process liquids and chemicals costing $60,000 are heated and three different compounds emerge: 3,000 gallons of Molecue worth $22 per gallon are created from the steam; 10,000 gallons of Borphue worth $15 are drained from the tank; and 1,000 gallons of the tank residue, labeled as Polygard, are sold as fertilizer for $5.50 per gallon. Before Molecue is sold, it must be purified in another process that costs $10,000, and before the Polygard fertilizer is sold, it must be bottled at a price of $1.50 per gallon.

a. What is the profitability of the joint process?

b. Is it profitable to process Molecue further if it can be sold at split-off for $5 per gallon?

c. BioMorphs has an offer to sell Polygard bulk at the split-off point without bottling for $3,500 per month. What is the incremental profit (loss) to BioMorphs if it accepts the offer?

Answer 1

* Kindly comment down for any clarifications/ queries and please upvote it helps a lot to me. Thank-you.