question archive Sutter Chemical has spent $241,000 to refine 76,000 L of acetone, which can be sold for $2
Sutter Chemical has spent $241,000 to refine 76,000 L of acetone, which can be sold for $2
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Sutter Chemical has spent $241,000 to refine 76,000 L of acetone, which can be sold for $2.60/L. Alternatively, Sutter Chemical can process the acetone further to yield a total of 64,000 L of lacquer thinner that can be sold for $3.00/L. The additional processing will cost $0.45/L of lacquer thinner. To sell the lacquer thinner, Sutter Chemical must pay shipping of $0.24/L and administrative expenses of $0.10/L on the thinner. Requirements 1. Fill in the diagram for Sutter's decision. 2. Identify the sunk cost. Is the sunk cost relevant to Sutter's decision? Why or why not? 3. Should Sutter sell the acetone or process it into lacquer thinner? Show the expected net revenue difference between the two alternatives. Requirement 1. Fill in the diagram for Sutter's decision. Sell As Is $ Acetone sales revenue $ Sunk cost of producing 76,000 L of acetone $ Process Cost of further processing Further $ Lacquer thinner sales revenue
