Thorpe Industries produces chemicals for the swimming pool industry. In one joint process 10,000 gallons of GSX are processed into 7,000 gallons of xenolite and 3,000 gallons of banolide. The cost of the joint process, including the GSX, is $17,500. The firm allocates $11,800 of the joint cost to the xenolite and $5,700 of the cost to banolide. The 3,000 gallons of banolide can be sold at the split-off point for $3,500, or be processed further into a product called Kitrocide. The sales value of kitrocide is $11,000, and the additional processing cost is $7,900.
Required:
Thorpe's president has asked your consulting firm to make a recommendation as to whether the banolide should be sold at the split-off point or processed further. Explain your answer.