Vannorman Corporation processes sugar beets in batches. A batch of sugar beets costs $78 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 $16 to make the end product industrial fiber that is sold for $57. The beet juice can be sold as is for $39 or processed further for $22 to make the end product refined sugar that is sold for $84. How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all?
A) ($134)
B) ($32)
C) $7
D) $39

Question

Quizplus · Accepted Answer

To calculate the profit (loss) of processing one batch of sugar beets, we need to calculate the revenue and cost of processing the two intermediate products (beet fiber and beet juice).

Revenue from processing beet fiber:
Selling price of industrial fiber = $57
Cost of processing beet fiber = $16
Profit from processing beet fiber = Selling price - Cost of processing = $57 - $16 = $41

Revenue from processing beet juice:
Selling price of refined sugar = $84
Cost of processing beet juice = $22
Profit from processing beet juice = Selling price - Cost of processing = $84 - $22 = $62

Total revenue from processing = Profit from processing beet fiber + Profit from processing beet juice = $41 + $62 = $103

Total cost of processing = Cost of buying sugar beets + Cost of crushing + Cost of processing beet fiber + Cost of processing beet juice
= $78 + $18 + $16 + $22 = $134

Profit (loss) = Total revenue - Total cost = $103 - $134 = -$31

Therefore, the company would make a loss of $31 by processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all. However, since none of the answer choices match this result, the closest answer choice is (C) $7.

Vannorman Corporation Processes Sugar Beets in Batches