Question

Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $44 to buy from farmers and $15 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $20 or processed further for $19 to make the end product industrial fiber that is sold for $52. The beet juice can be sold as is for $35 or processed further for $23 to make the end product refined sugar that is sold for $52.

What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?

Multiple Choice

• ($21) per batch

• ($6) per batch

• ($65) per batch

• ($39) per batch

Answer 1

Based on the information available in the question, we can answer as follows:-

Financial advantage (disadvantage) from processing the intermediate product beet juice into refined sugar:-

=Incremental Revenue from processing - Increment Costs in processing

= ($52 - $35) - $23

=$17 - $23

=(6)

As per the calculation above, the correct answer is Option B - (6) per batch.

Option A , Option C and Option D are incorrect based on the above considerations and explanations.

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