MA38 Problem: Sell or Process Further – Smits Ltd.

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MA38 Problem: Sell or Process Further – Smits Ltd.

 

Smits Chemicals Ltd. produces three chemicals, A, B and C. Processing begins with onesubstance, ogg. Subsequent processing occurs to produce B and C. A does not require further  processing. Joint costs are $100,000. Other production and sales information is as follows:Production Selling Price per tonne atCompletionSelling Price per tonne atSplit Off A 800 tonnes $50$50.00B 600 tonnes $300$200.00C 400 tonnes $420$287.50 Further processing costs for B and C are $40,000 and $60,000 respectively.Required:1. Should Smits sell at the split off point or process further?

    • 9 years ago
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