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 and16 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 for17 to make the end product, industrial fiber, thats sold for 38. The cane juice can be sold as is for34 or processed further for 23 to make the end product of molasses that is sold for76.

Which of the intermediate products should be processed further?
1) Cane fiber should NOT be and Juice SHOULD be
2) Fiber should NOT be and juice should NOT be
3) Fiber SHOULD be and juice SHOULD be
4) Fiber SHOULD be and juice should NOT be

Answer 1

After calculating the net gain for both cane fiber and cane juice, it is clear that cane fiber should not be processed further as it results in a loss, while cane juice should be processed further into molasses since it increases profitability. Correct option is 1)

Step-by-step explanation:

To determine which intermediate products should be processed further, we need to analyze the profitability of processing each product.

For cane fiber, selling it as is brings in $24, and processing it further costs $17 to produce industrial fiber that sells for $38. The net gain would be $38 - $17 = $21. Comparing this to selling as is for $24, we see that processing further results in a loss: $24 (selling price) - $21 (net gain after further processing) = $3.

For cane juice, selling it as is brings $34, and processing it further costs $23 to produce molasses that sells for $76. The net gain from processing further would be $76 - $23 = $53. Therefore, processing the juice into molasses is more profitable: $53 (net gain after further processing) - $34 (selling price as is) = $19.

The answer is that cane fiber should not be processed further and cane juice should be processed further into molasses.