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Question
A chemical company spent $480,000 to produce 144,000 gallons of a chemical, which can be sold for $4.32 per gallon. The chemical can be further processed into a weed killer which can be sold for $6.40 per gallon; it will cost $256,320 to process the chemical into a weed killer. Which of the following is TRUE?
A) To maximize operating income, the company should continue to sell the chemical as is.
B) If the company decides to process further, it will increase operating income by $299,520.
C) If the company decides to process further, it will increase operating income by $43,200.
D) If the company decides to process further, it will decrease operating income by $256,320.
Answer
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