Answer:
Selling at split-off point is more cost effective by $48,750.
Explanation:
Total gallons of anderine and dofinol = 6,500 + 7,800 = 14,300
Weight of anderline = 6,500 / 14,300 = 0.454545454545455
Anderline share of cost at split-off point = $77,500 * 0.454545454545455 = $35,227.27
Cost per unit anderline = $35,227.27 / 6,500 = $5.42
Split-off point revenue from anderline = 6,500 * $10 = $65,000
Split-off point profit from anderline = $65,000 - $35,277.27 = $29,772.73
Additional processing cost on aderline = 6,500 * $7.50 = $48,750
Total cost of cermine = Anderline share of cost at split-off point + Additional processing cost on aderline = $35,227.27 + $48,750.00 = $83,977.27
Number of cermine = 6,500 / 3 = 2,167
Cost per unit of cermine = $83,977.27 / 2,167 = $38.76
Revenue from cermine = (6,500 / 3) * $62 = $134,333.33
Profit from cermine = $134,333.33 - $83,977.27 = $50,356.06
Difference between total cost cermine and anderline = $83,977.27 - $35,227.27 = $48,750
Cost effective means an alternative that requires lower cost.
Therefore, selling at split-off point is more cost effective by $48,750.