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

Question

Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $62 to buy from farmers and $21 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 $32 or processed further for $33 to make the end product industrial fiber that is sold for $81. The beet juice can be sold as is for $53 or processed further for $37 to make the end product refined sugar that is sold for $81.

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

$(153)

$(4)

$9

$19

Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $62 to buy from farmers and $21 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 $32 or processed further for $33 to make the end product industrial fiber that is sold for $81. The beet juice can be sold as is for $53 or processed further for $37 to make the end product refined sugar that is sold for $81.

Explanation / Answer

Computation of profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar.We have,

Step1: Computation of apportionment of cost for both product at the point of seperation using market value at the point of seperation method.We have,

Total cost at the point of seperation = Cost of sugar beets + Crushing costs = 62 + 21 = $ 83.00

Selling price of beet fiber at the point of seperation = $ 32

Selling price of Juice at the point of seperation = $ 53

Step2: Computation of net profit/loss for the further processing of both products.We have,

Hence, the net profit does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar is $ 9.00

Products Production in terms of sales value at the point of seperation Weightage Joint cost Apportionment Beet fiber $ 32.00 83 x 32/85 $ 31.25 Beet Juice $ 53.00 83 x 53/85 $ 51.75 Total $ 85.00 $ 83.00

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