Joint Product Decisions

Abstract

Cydilla Separators is a manufacturer of biological concentrates which accelerate the fruit ripening process. The basic raw material from which these concentrates are derived is called Marimol, and costs £14 per kilogram to make. From 4 kilograms of Marimol, it is possible by further processing to produce 2 kilograms of Aplintasarate and 2 kilograms of Ruthenase. This processing costs £9 per kilogram for the Aplintasarate and £7 per kilogram for the Ruthenase. Aplintasarate is a final product, but Ruthenase cannot be sold directly to Cydilla’s customers. It must be left to cool, and then separated out in such a way that 2 kilograms of Ruthenase give rise to 1.5 kilograms of Lefcon and 0.5 kilograms of Grodyn. There is a large market for Lefcon, and Cydilla’s production represents only a tiny proportion of the available supply of this product. Consequently, Cydilla can either buy or sell Lefcon, in what are for practical purposes unlimited quantities, at the market price of £17 per kilogram. From 1.5 kilograms of Lefcon, Cydilla can by chemical means synthesise 1 kilogram of a final product called Jantym; this process costs £12 per kilogram of Jantym produced.