Question

BioMorphs Corporation produces three products in a monthly joint production process. During the first stage of the process liquids and chemicals costing $30,800 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 $10,700, 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 A Required B Required C What is the profitability of the joint process? Total profit Required B >

Answer 1

Below is the answer
Statement showing computations
Particulars	Molecule	Borphue	Polyguard	Total
No of Gallons	3,000.00	10,000.00	1,000.00
Revenue per Gallon	22.00	15.00	6.00
Total revenue	66,000.00	1,50,000.00	6,000.00	2,22,000.00
Additional costs	10,700.00		1,500.00	12,200.00
Joint costs				30,800.00
Profitability				1,79,000.00
b)
Revenue after further processing	22.00
Revenue at split off point	6.00
Incremental revenue per gallon	16.00
No of Gallon	3,000.00
Total incremental revenue	48,000.00
Additional costs	10,700.00
Incremental profit	37,300.00
Process further
c)
Revenue after further processing	6,000.00
Revenue at split off point	3,100.00
Loss of revenue	-2,900.00
Savings of additional costs	1,500.00
Incremental profit (Loss) if process further	-1,400.00
If it accepts the offer it will suffer loss of $1,400