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 $37 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 $23 or processed further for $15 to make the end product industrial fiber that is sold for $35. The beet juice can be sold as is for $43 or processed further for $35 to make the end product refined sugar that is sold for $71. 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

Since, the beet juice will be processed further, we will take into account the cost of processing further and the sales price that could have been realized (as the total cost), had the beet juice been sold as it is. The formula that can be derived for calculating profit/loss would be:

Profit/(Loss) = Sales Value after Further Processing - Cost of Further Processing - Sales Value without Further Processing

____________

Here, Sales Value after Further Processing = $79, Cost of Further Processing = $39 and Sales Value without Further Processing = $41

Using these values in the above formula, we get,

Profit/(Loss) = 79 - 39 - 41 = $(1) (which is Option C)

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