Question

Mae Refiners, Incorporated, processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $60 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $29 or processed further for $13 to make the end product industrial fiber that is sold for $61. The cane juice can be sold as is for $40 or processed further for $28 to make the end product molasses that is sold for $67.

What is the financial advantage (disadvantage) for the company from processing the intermediate product cane juice into molasses rather than selling it as is?
Multiple Choice
A) ($14) per batch
B) ($74) per batch
C) ($38) per batch
D) ($1) per batch

Answer 1

The financial advantage for the company from processing cane juice into molasses rather than selling it as is is $27 per batch.

Step-by-step explanation:

The financial advantage (disadvantage) for the company from processing the intermediate product cane juice into molasses rather than selling it as is can be calculated by comparing the revenue generated from selling cane juice as is with the revenue generated from processing it into molasses.

If the company sells the cane juice as is, the revenue would be $40 per batch. However, if it is processed further into molasses, the revenue would be $67 per batch.

The difference in revenue is $67 - $40 = $27 per batch. Therefore, the financial advantage for the company from processing cane juice into molasses rather than selling it as is is $27 per batch.