Take Test: Take-homelOn-line Final beet iber and beet juice, emerge from the cru

Question

Take Test: Take-homelOn-line Final beet iber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 ar processed further for $18 to make the end product industrial fiber that is sold for $39 The beet juice can be sold as is for $32 or iber, beet juice should NOT ba iber, beet jice should be processed into refined sugar ssed into refined sugar o beel fber shouid be processed into industrial fber, beet juice should NOT be processed into refined sugar n wil save ths r Type here to search 9:30 PM 12/11/2017

Explanation / Answer

To allocate the cost upto the split off point, we shall use the ratio of sales price at split off point.

Selling price: Beet fibre = $25

Beet juice = $32

Cost upto split off point = $53 + $18 = $71

Cost allocated to beet fibre = $71 * $25 / ($25+32) = $31.14

Cost allocated to beet juice = $71 * $32 / ($25 + 32) = $39.86

Now if we further process beet fibre it cost ould be = $31.14 + $18 = $49.14

Selling price of processed beet fibre = $39

Since the selling price after processing is less than cost, it is advisable not to further process beet fibre into industrial fibre.

If beet juice is processed cost = $39.86 + $28 = 67.86

Selling price = $79

Since the selling price of processed beet juice is higher than the cost, it results in profit and should be further processed into refined sugar.

Third option is correct.

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