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 $39 to buy from farmers and $13 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 $21 or processed further for $13 to make the end product industrial fiber that is sold for $33. The beet juice can be sold as is for $41 or processed further for $37 to make the end product refined sugar that is sold for $73. 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

Refined Sugar Final sales value after further processing $73 Less sales value at split-off point $41 Incremental revenue from further processing $32 Less cost of further processing $37 Profit (loss) from further processing $(5)

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