Question

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

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