Question

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

Delmonte Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $31 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 $27 or processed further for $14 to make the end product industrial fiber that is sold for $44. The beet juice can be sold as is for $32 or processed further for $17 to make the end product refined sugar that is sold for $50. Which of the intermediate products should be processed further?

Multiple Choice:

A) beet fiber should NOT be processed into industrial fiber; beet juice should be processed into refined sugar

B) beet fiber should NOT be processed into industrial fiber; beet juice should NOT be processed into refined sugar

C) beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar

D) beet fiber should be processed into industrial fiber; beet juice should NOT be processed into refined sugar

Homework Answers

Answer #1
Beet fiber:
Revenue, if processes further 44
Less: Revenues, if sold as is 27
Incremental revenue 17
Less: Processing costs 14
Incremental income(loss) 3
Beet juice:
Revenue, if processes further 50
Less: Revenues, if sold as is 32
Incremental revenue 18
Less: Processing costs 17
Incremental income(loss) 1
Processing of Both Beet fiber and Beet juice provide incremental income
Beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar
Option C is correct
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