Question

COMPANY A processes sugar can that it purchases from farmers. Sugar cane is processed in batches. A catch of sugar cane cost $48 to buy from farmers and $16 to crush in the companys plant. Two intermediate products, cane fiber and cane juice, emerge froom the crushing process. The cane fiber can be sold as is for $24 or processed further for $17 to make the end product, industrial fiber, thats sold for $38. The cane juice can be sold as is for $34 or processed further for $23 to make the end product of molasses that is sold for $76.

How much profit (loss) does the company make by processing the intermediate product cane juice into molasses rather than selling it?

A)$3
B)$19
C)$(45)
D)$(13)

Answer 1

Company A makes an additional profit of $19 by processing cane juice into molasses instead of selling it directly.

Therefore, the correct answer is: option B)$19

Step-by-step explanation:

The question concerns the profit or loss made by Company A by processing the intermediate product cane juice into molasses instead of selling it as is.

To calculate this, we compare the sale price of molasses with the combined costs of cane juice and its further processing.

The cane juice can be sold for $34, but if processed into molasses, it sells for $76 with an additional processing cost of $23.

The difference in profit when processing into molasses instead of selling cane juice as is is calculated as follows:

Sale price of molasses - (Cost of cane juice + Processing cost of cane juice to molasses)

$76 - ($34 + $23)

= $76 - $57

= $19

Therefore, by processing the cane juice into molasses, Company A makes an additional profit of $19.