Question

Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches....

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

Homework Answers

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.

Please let me know if you have any questions via comments and all the best :)

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