Hayase Corporation processes sugar beets that it purchases from farmers. Sugar b

Question

Hayase Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $35 to buy from farmers and $14 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 $27 or processed further for $11 to make the end product industrial fiber that is sold for $40. The beet juice can be sold as is for $36 or processed further for $21 to make the end product refined sugar that is sold for $46.

Which of the intermediate products should be processed further?

Explanation / Answer

Hi, Please find the calculations as follows: Beet Fiber Sales value after further processing 58 Costs of further processing 19 Benefit of further processing 39 Less: Sales value at split-off point 20 Net advantage (disadvantage) 19 Beet Juice Sales value after further processing 58 Costs of further processing 23 Benefit of further processing 35 Less: Sales value at split-off point 41 Net advantage (disadvantage) -6 Best Fiber should be processed further. Thanks, Aman

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