Coakley Beet Processors, Inc., processes sugar beets in batches. A batch of suga

Question

Coakley Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets costs $48 to buy from farmers and $10 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 $24 or processed further for $16 to make the end product industrial fiber that is sold for $36. The beet juice can be sold as is for $44 or processed further for $28 to make the end product refined sugar that is sold for $70. How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is? a. $(60) b. $(2) c. $(12) d. $(31) Level:Difficult

Explanation / Answer

The beet fiber should be processed further, but the beet juice should not be processed further. Processing the beet fiber further costs $11, but increases the selling price by $13 (40-27), so they can make $2 (13-11) more per batch by processing the beet fiber further. Processing the beet juice further would cost $21, and the increase in selling price would be $10 (46-36). They would make $11 (10-21) less per batch if they process the beet juice further.

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