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 $49 to buy from farmers and $11 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 $25.50 or processed further for $16.75 to make the end product industrial fiber that is sold for $36.75. The beet juice can be sold as is for $44.80 or processed further for $28.60 to make the end product refined sugar that is sold for $72. 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

The cost of Sugar Beets is $49 and $11 which comes to $ $60.

Revenue, when the two intermediate products are not further processed, are $$25.5 and $44.8 which is 70.3

Company will make a profit of $10.3

Now profit/(loss) on processing the intermediate product beet juice into refined sugar rather than selling it is as calculated below:

Total costs = 49+ 11 + 28.6 = 88.6

Total revenues 25.5 + 72 = 97.5
They will lose $8.9 per batch if the beet juice is processed further.

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