Question: i just need help with 9 boxes! all info is there!! please help Preston Chemical has spent $239,000 to refine 70,000 gallons of acetone, which
Preston Chemical has spent $239,000 to refine 70,000 gallons of acetone, which can be sold for $2.40 a gallon. Alternatively, Preston Chemical can process the acetone further. This processing will yield a total of 58,000 gallons of lacquer thinner that can be sold for $3.30 a gallon. The additional processing will cost $0.75 per gallon of lacquer thinner. To sell the lacquer thinner, Preston Chemical must pay shipping of $0.21 a gallon and administrative expenses of $0.15 a gallon on the thinner. Requirements 1. Identify the sunk cost. Is the sunk cost relevant to Preston's decision? Why or why not? 2. Should Preston sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. Requirement 1. Identify the sunk cost. Is the sunk cost relevant to Preston's decision? Why or why not? The amount spent to refine the acetone is a sunk cost that does not differ between alternatives of selling as is or processing further. Consequently, this sunk cost of 239.000 irrelevant to the sell or process further decision Requirement 2. Should Preston sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. (Enter a "O" for any zero amounts. Use a minus sign or parentheses in the Difference column if the Sell As Is amount exceeds the Process Further amount.) Soll Process As Is Further Difference Sales revenue Less: Additional processing costs to convert lacquer thinner Net benefit to operating income per batch Decision: Sell acetone as is
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