Rouse Chemical has spent $241,000 to refine 72,000 gallons of acetone, which Req

Question

Rouse Chemical has spent $241,000 to refine 72,000 gallons of acetone, which Requirements can be sold for $2.30 a gallon. Alternatively, Rouse Chemical can process the 1. ldenbfy the sunk cost. Is the sunk cost relevant to Rouse's decision? Why or acetone further. This processing will yield a total of 61,000 gallons of lacquer thinner that can be sold for $3 30 a gallon. The addtional processing will cost $0 65 per gallon of lacquer thinner. To sell the lacquer thinner, Rouse Chemical must pay shipping of $0 24 a gallon and administrative expenses of $0.15 a galion on the thinner why not? 2.Shold Rouse sell the acetone as ?? process it ito lacquer thrver? Show the expected net revenue difference between the two altenatives. Requirement 1. Identily the sunk cost. Is the sunk cost relevant to Rouse's decision? Why or why not? s for a Over is a sunk cost that The differ between alternatives of selling as is or processing further. Consequently, this sunk cost of $ to the sell or process further decision Requirement 2. Shoud Rouse sell the acetone as is or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. Sell Process Choose from any list or enter any number in the input fields and then continue to the next question. Welcome to MyAccountin Before you start, run the Browser Check to confirm that 5:16

Explanation / Answer

1 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 $(241,000) is (irrelevant) to the sell or process further decision. 2 Rouse Petroleum Company Sell As Is or Process Further Analysis Sell As Is Process Further Difference Sales revenue 165600 201300 Less :Additonal proccessing cost to convert lacquer thinner -63440 Net benefit to operating income per batch 165600 137860 -27740 Decision: Sell acetone as is (72000*2.3 = 165600) (61000*3.3 = 201300) (0.65+0.24+0.15)*61000 = 63440 Note: Ihave tried my best for correct solution still need any further help, please ask in comment. Thanks

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