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 $55 to buy from farmers and $17 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 $31 or processed further for $23 to make the end product industrial fiber that is sold for $43. The beet juice can be sold as is for $51 or processed further for $35 to make the end product refined sugar that is sold for $77. How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

Coakley Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets costs $55 to buy from farmers and $17 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 $31 or processed further for $23 to make the end product industrial fiber that is sold for $43. The beet juice can be sold as is for $51 or processed further for $35 to make the end product refined sugar that is sold for $77. How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

Explanation / Answer

Solution.

Note: Since it is clearly mentioned that only beet juice is processed further, thus profits have been calculated for the company when beet fiber is not processed further.

Calculation of total Profit or Loss of company when Beet juice is processed further to make refined sugar-

77

Particulars Amount ($) Sale price of beet fiber 31 Sale price of Refined sugar (beet juice processed further)

77

Total Revenue (A) 108 Cost of Sugar Beets 55 Crushing Cost 17 Further processing cost of beet juice (to make refined sugar) 35 Total Cost (B) 107 Profit to company (A-B) 1

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