A petrochemical factory produces two products, L and M, as a result of a joint process. Both products are sold to manufacturers as ingredients for assorted chemical products. Product L sells at split-off for $0.25 per litre; M, for $0.30 per litre. Data for April follow.
Joint processing cost……….$1,600,000
Litres produced and sold:
L……………………………………..4,000,000
M…………………………………….2,500,000
Suppose that in April the 2,500,000 litres of M could have been processed further into Super M at an additional cost of $225,000. The Super M output would be sold for $0.38 per litre. 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 computations.
