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.What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all?
A) $15 per batch
B) ($14) per batch
C) ($117) per batch
D) $1 per batch

Question

Quizplus · Accepted Answer

The financial advantage of processing one batch of sugar beets into the end products rather than not processing them at all is calculated by comparing the net revenue from selling the end products against the net revenue from selling the intermediate products directly, including all relevant costs.1. **Cost to buy and crush one batch**: $53 (buy) + $18 (crush) = $71.2. **Selling as intermediate products**:   - Beet fiber: $25   - Beet juice: $32   - Total revenue from selling intermediate products: $25 + $32 = $57.   - Net disadvantage from not processing further: $71 (cost) - $57 (revenue) = $14 disadvantage.3. **Processing further into end products**:   - Additional processing cost for beet fiber into industrial fiber: $18.   - Additional processing cost for beet juice into refined sugar: $28.   - Total additional processing costs: $18 + $28 = $46.   - Revenue from selling industrial fiber: $39.   - Revenue from selling refined sugar: $79.   - Total revenue from selling end products: $39 + $79 = $118.   - Net revenue after additional processing: $118 (revenue) - $46 (additional processing costs) = $72.   - Net advantage from processing further: $72 (net revenue after additional processing) - $71 (initial cost) = $1 advantage.Therefore, the financial advantage for the company from processing one batch of sugar beets into the end products rather than not processing that batch at all is $1 per batch.

Boney Corporation Processes Sugar Beets That It Purchases from Farmers