Reference no: EM132644841

Question - Biomorphs Corporation produces three products in a monthly joint production process. During the first stage of the process liquids and chemicals costing $60,000 are heated and three different compounds emerge: 3,000 gallons of Molecule 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 $5.50 per gallon. Before Molecule is sold, it must be purified in another process that costs $10,000, and before the Polygard fertilizer is sold, it must be bottled at a price of $1.50 per gallon.

Required -

1. What is the profitability of the joint process?

2. Is it profitable to process Molecule further if it can be sold at split off for $5 per gallon?

3. BioMorphs has an offer to sell Polygard bulk at the split-off point without bottling for $3500 per month. What is the incremental profit (loss) to BioMorphs if it accepts the offer?