Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 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 $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79.Which of the intermediate products should be processed further?
A) beet fiber should 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 NOT 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

Question

Quizplus · Accepted Answer

For beet fiber, processing it further into industrial fiber costs $18 and sells for $39, making a profit of $21. However, it can be sold as is for $25, making further processing not worthwhile since the net gain from processing ($21) is less than its current sale value ($25). For beet juice, processing it further into refined sugar costs $28 and sells for $79, making a profit of $51. Since it can be sold as is for $32, processing it further is beneficial because the net gain from processing ($51) is greater than its current sale value ($32).

Boney Corporation Processes Sugar Beets That It Purchases from Farmers