Question: An Exxon petrochemical factory produces two products L and M

An Exxon petrochemical factory produces two products, L and M, as a result of a particular joint process. Both products are sold to manufacturers as ingredients for assorted chemical products. Product L sells at split-off for $.25 per gallon; M sells for $.30 per gallon. Data for April follow:
Joint processing cost $1,600,000
Gallons produced and sold
L 4,000,000
M 2,500,000
Suppose that in April the 2,500,000 gallons of M could have been processed further into Super M at an additional cost of $165,000. The Super M output would be sold for $.36 per gallon. Product L would be sold at split-off in any event.
Should M have been processed further in April and sold as Super M? Show your computations.

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  • CreatedNovember 19, 2014
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