Answer Happy

RNA-1 has no market value until it is converted into a pesticide with the trade name Fastkil. Processing RNA 1 into Fastkil costs $240000. Fastkil wholesales at $50 per 100 kilograms RNA-2 is sold as is for 180 per 100 kilograms. However, management has discovered that RNA-2 can be converted into two new products by adding 400 000 kilograms of the compound LST to the 400 000 kilograms of RNA-2 This joint process would yield 400 000 kilograms each of DMZ-3 and Pestrol, the two new products. The additional direct material and related processing costs of this joint process would be $120000, DMZ-3 and Pestrol would each be sold for $57.50 per 100 kilograms. The company's management has decided not to process RNA- 2 further, based on the analysis presented in the following schedule. Process further Pestrol DMZ-3 Total RNA-2 400000 400000 Production (kg) $400000 $230000 $230000 $320000 Revenue VDB costs 61500 61500 123000 Additional direct materials (ST) and processing of RNA-2 120000 00000 () 00000 Total costs $121500 $121500 $243000 S 82000 $238000 Weekly gross profit $108 500 $108 500 $217000 *$82000 is one-third of the $246000 cost of processing VDB When RNA 2 is not processed further, one-third of the final output is RNA-2 (400 000 out of a total of 1200.000 kilograms) $123000 is one half of the $246000 cost of processing VDB. When RNA-2 is processed further, one-half of the final output consists of DMAZ-3 and Pestrol The final products then are: B00000 kilograms of RNA 1, 400 000 kilograms of DMZ 3; and 400 000 kilograms of Pestrol Required: Evaluate Talor Chemical Company's analysis and make any revisions that are necessary. Your critique and analysis should indicate the following: (a) whether management made the correct decision (b) gross savings or loss per week resulting from the decision not to process RNA-2 further, if different from management's analysis.
RNA-1 has no market value until it is converted into a pesticide with the trade name Fastkil. Processing RNA 1 into Fastkil costs $240000. Fastkil wholesales at $50 per 100 kilograms RNA-2 is sold as is for 180 per 100 kilograms. However, management has discovered that RNA-2 can be converted into two new products by adding 400 000 kilograms of the compound LST to the 400 000 kilograms of RNA-2 This joint process would yield 400 000 kilograms each of DMZ-3 and Pestrol, the two new products. The additional direct material and related processing costs of this joint process would be $120000, DMZ-3 and Pestrol would each be sold for $57.50 per 100 kilograms. The company's management has decided not to process RNA- 2 further, based on the analysis presented in the following schedule. Process further Pestrol DMZ-3 Total RNA-2 400000 400000 Production (kg) $400000 $230000 $230000 $320000 Revenue VDB costs 61500 61500 123000 Additional direct materials (ST) and processing of RNA-2 120000 00000 () 00000 Total costs $121500 $121500 $243000 S 82000 $238000 Weekly gross profit $108 500 $108 500 $217000 *$82000 is one-third of the $246000 cost of processing VDB When RNA 2 is not processed further, one-third of the final output is RNA-2 (400 000 out of a total of 1200.000 kilograms) $123000 is one half of the $246000 cost of processing VDB. When RNA-2 is processed further, one-half of the final output consists of DMAZ-3 and Pestrol The final products then are: B00000 kilograms of RNA 1, 400 000 kilograms of DMZ 3; and 400 000 kilograms of Pestrol Required: Evaluate Talor Chemical Company's analysis and make any revisions that are necessary. Your critique and analysis should indicate the following: (a) whether management made the correct decision (b) gross savings or loss per week resulting from the decision not to process RNA-2 further, if different from management's analysis.