Question

BioMorphs Corporation produces three products in a monthly joint production process. During the first stage of the process liquids and chemicals costing $59,200 are heated and three different compounds emerge: 3,000 gallons of Molecue worth $22 per gallon are created from the steam; 10,000 gallons of Borphue worth $15 are drained from the tank; and 1,000 gallons of the tank residue, labeled as Polygard, are sold as fertilizer for $6.00 per gallon. Before Molecue is sold, it must be purified in another process that costs $10,800, and before the Polygard fertilizer is sold, it must be bottled at a price of $1.50 per gallon. a. What is the profitability of the joint process? b. Is it profitable to process Molecue further if it can be sold at split-off for $6 per gallon? c. BioMorphs has an offer to buy Polygard bulk at the split-off point without bottling for $3,100 per month. What is the incremental profit (loss) to BioMorphs if it accepts the offer? Complete this question by entering your answers in the tabs below. Required C Required A Required B What is the profitability of the joint process? Total profit

Answer 1

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Statement showing Computations
Particulars	Molecule	Borphue	Polygard	Total
Selling price	22.00	15.00	6.00
Total Quarterly output in pounds or gallons	3,000.00	10,000.00	1,000.00
Total Revenue	66,000.00	150,000.00	6,000.00	222,000.00
Costs incurred for selling	10,800.00		1,500.00	12,300.00
Joint Costs				59,200.00
Profitability				150,500.00
b)
Particulars	Product A
Selling price after further processing	22.00
Selling price at split off point	6.00
Incremental revenue per pound or gallon	16.00
Total output in pounds or gallons	22,000.00
Total Incremental Revenue	352,000.00
Total Incremental Processing costs	10,800.00
Total Incremental profit or loss	341,200.00
	Process Further
c)
Selling price after further processing	6,000.00
Selling price at split off	3,100.00
Total Incremental Revenue	2,900.00
Total Incremental Processing costs	1,500.00
Total Incremental profit or loss	1,400.00
Do not accept the offer and process further	Process Further