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Managerial Accounting

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Moderate

Incremental Profit for WR Co.

MGRACT-4YGCKH

WR Co. spent \$150,000 on refining 140,000 gallons of petroleum into motor oil (70,000 gallons) and gasoline (70,000 gallons). The motor oil could be sold at split-off for \$40,000; the gasoline could be sold at split-off for \$60,000. The motor oil could be processed further at a cost of \$50,000 and would then sell for \$180,000.

If the motor oil is processed further, the difference in profit between the two alternatives would be:

A

$\$30,000$

B

$\$90,000$

C

$\$130,000$

D

$\$70,000$