Arenz Corporation processes sugar cane in batches. The company purchases a batch of sugar cane for $53 from farmers and then crushes the cane in the company's plant at the cost of $15. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $24 or processed further for $18 to make the end product industrial fiber that is sold for $40. The cane juice can be sold as is for $41 or processed further for $25 to make the end product molasses that is sold for $72. Which of the intermediate products should be processed further?
A)Cane fiber should be processed into industrial fiber; Cane juice should be processed into molasses
B)Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be processed into molasses
C)Cane fiber should be processed into industrial fiber; Cane juice should NOT be processed into molasses
D)Cane fiber should NOT be processed into industrial fiber; Cane juice should be processed into molasses

Question

Quizplus · Accepted Answer

Cane fiber should not be processed further because the additional processing cost ($18) exceeds the increase in sales value ($40 - $24 = $16). Cane juice should be processed further because the additional processing cost ($25) is less than the increase in sales value ($72 - $41 = $31).

Arenz Corporation Processes Sugar Cane in Batches