Question

Swagger corporation purchases potatoes from farmers. The potatoes are then peeled, producing two intermediate products - peels and depeeled spuds. The peels can be processed further to make a cocktail of organic nutrients, and the depeeled spuds can be processed further to make frozen french fries. A batch of potatoes costs 43 to buy from farmers and 11 to peel in the company's plant. The peels produced from a batch can be sold as is for animal feed for 25 or processed further for 16 to make the cocktail of nutrients that are sold for 45. The depeeled spuds can be sold as is for 36 or processed further for 25 to make frozen french fries that are sold for 57. a. Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries? profit / loss - how many? b. Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further into an end product? (8 marks) Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further into an end product? (negative amounts should be indicated by a minus sign.)

Answer 1

The company makes a profit of $3 from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries. The peels should be processed further into a cocktail of organic nutrients, while the depeeled spuds should be processed further into frozen french fries.

Step-by-step explanation:

To calculate the profit or loss from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries, we need to analyze the cost and revenue associated with each option.

1. For the cocktail of organic nutrients, the cost of processing the peels is $16 per batch. If the peels are sold as is, the revenue from selling them as animal feed is $25 per batch. However, if the peels are processed further, the revenue from selling the cocktail of nutrients is $45 per batch.
2. For the frozen french fries, the cost of processing the depeeled spuds is $25 per batch. If the depeeled spuds are sold as is, the revenue from selling them is $36 per batch. However, if the depeeled spuds are processed further, the revenue from selling the frozen french fries is $57 per batch.

To calculate the total profit or loss, we subtract the cost from the revenue for each option and compare the results.

For the cocktail of organic nutrients: Revenue - Cost = $45 - $16 = $29

For the frozen french fries: Revenue - Cost = $57 - $25 = $32

To calculate the total profit or loss, we add up the profits or losses from each option:

Profit/loss = ($29 + $32) - ($43 + $11) = $57 - $54 = $3

Therefore, the company makes a profit of $3 from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries.