€587,500 Nor-Pharma is €32,500 better off by changing two of its current policies – it should sell Lorex at split-off (€25,000 improvement) and process Hycol further (€7,500 improvement. 3 ab Nor-Pharma would be better off by €12,000 by selling Dorzine to Nor-Chem. Further processing Dorzine Incremental revenue (€0.75 × 50,000) + a €55,000 €37,500 + €17,500 Incremental processing cost
43,000 Incremental operating income €12,000 a Disposal costs avoided by processing further €0.35 × 50,000 = €17,500 b The decision to treat Dorzine should not affect decisions as to whether to process further or sell at the split-off point. Accounting decisions about joint- product/by-product distinctions do not affect total revenues or total costs.
