Question

Green Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $43 to buy from farmers and $14 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 $19 or processed further for $18 to make the end product industrial fiber that is sold for $51. The beet juice can be sold as is for $34 or processed further for $22 to make the end product refined sugar that is sold for $51.

Required:
What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar?

Answer 1

Answer:

Financial advantage $5

Explanation:

The computation of the financial advantage (disadvantage) for the company is shown below:

Combined sales value ($51 + $51) $102

Less: further processing ($18 + $22) -$40

Sugar beets cost -$43

Cost to crush -$14

Financial advantage $5

We simply deduct all cost from the revenue so that the financial advantage or disadvantage could come