Paine Corporation processes sugar beets in batches that it purchases from farmers for $72 a batch. A batch of sugar beets costs $11 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 $16 to make the end product industrial fiber that is sold for $40. The beet juice can be sold as is for $43 or processed further for $28 to make the end product refined sugar that is sold for $100. Which of the intermediate products should be processed further?
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 NOT be processed into refined sugar
D) beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar

Question

Quizplus · Accepted Answer

Processing beet juice into refined sugar increases its value by $57 ($100 - $43), which is greater than the additional processing cost of $28, resulting in a net gain. However, processing beet fiber into industrial fiber only increases its value by $13 ($40 - $27), which is less than the additional processing cost of $16, resulting in a net loss. Therefore, only beet juice should be processed further.

Paine Corporation Processes Sugar Beets in Batches That It Purchases