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Sohr Corporation processes sugar beets that it purchases from farmers. Sugar bee

ID: 2479750 • Letter: S

Question

Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $56 to buy from farmers and $15 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 $26 or processed further for $21 to make the end product industrial fiber that is sold for $69. The beet juice can be sold as is for $47 or processed further for $25 to make the end product refined sugar that is sold for $69.

How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?

Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $56 to buy from farmers and $15 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 $26 or processed further for $21 to make the end product industrial fiber that is sold for $69. The beet juice can be sold as is for $47 or processed further for $25 to make the end product refined sugar that is sold for $69.

Explanation / Answer

Particulars

Beet Fiber

Beet Juice

Sales Further Processing

                        69

                        69

Less: Sales at Split off Point

                     (26)

                     (47)

Incremental Revenue

                        43

                        22

Less : Additional Processing Cost

                     (21)

                     (25)

Incremental Profit

                        22

                        (3)

Profit by processing Sugar Beets= $22

Loss by Processing Sugar Juice to end Product Refined Sugar= $3

Hence Sugar beets is advisable to further process and Sugar juice to sell at split off Point

Particulars

Beet Fiber

Beet Juice

Sales Further Processing

                        69

                        69

Less: Sales at Split off Point

                     (26)

                     (47)

Incremental Revenue

                        43

                        22

Less : Additional Processing Cost

                     (21)

                     (25)

Incremental Profit

                        22

                        (3)

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