Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $47 to buy from farmers and $12 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 $17 or processed further for $16 to make the end product industrial fiber that is sold for $55. The beet juice can be sold as is for $38 or processed further for $20 to make the end product refined sugar that is sold for $55. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is? a) ($65) b) ($3) c) ($33) d) ($18)

Question

Business

Elaine Terrell

25 January, 11:58

Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $47 to buy from farmers and $12 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 $17 or processed further for $16 to make the end product industrial fiber that is sold for $55. The beet juice can be sold as is for $38 or processed further for $20 to make the end product refined sugar that is sold for $55. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is? a) ($65) b) ($3) c) ($33) d) ($18)

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Answers (1)

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Gaven Richardson · Answer 1

The correct answer is B.

Explanation:

Giving the following information:

Two intermediate products, beet fiber, and beet juice emerge from the crushing process.

The beet juice can be sold as-is for $38 or processed further for $20 to make the end product refined sugar that is sold for $55.

The firsts costs incurred are irrelevant to the decision-making process because they do not vary.

Sell as-is:

Contribution margin = $38

Continue processing:

Contribution margin = 55 - 20 = $35

It is more profitable to sell beet juice as-is.