Root Chemical has spent $$239,000$ to refine $74,000$ gallons of acetone, which can be sold for $$2\mathrm{.}50$ a

gallon. Alternatively, Root Chemical can process the acetone further. This processing will yield a total of $61,000$ gallons

of lacquer thinner that can be sold for $$3\mathrm{.}50$ a gallon. The additional processing will cost $$0\mathrm{.}85$ per gallon of lacquer

thinner. To sell the lacquer thinner, Root Chemical must pay shipping of $$0\mathrm{.}25$ a gallon and administrative expenses of

$$0\mathrm{.}11$ a gallon on the thinner.

Requirements

Identify the sunk cost. Is the sunk cost relevant to Root's decision? Why or why not?

Should Root 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 Root's decision? Why or why not?

The

is a sunk cost

that

differ between alternatives of selling as is or processing

further. Consequently, this sunk cost of

is

to the sell or process further decision.

Difference column if the Sell As Is amount exceeds the Process Further amount.$)$

Decision: