Question

Graham Corp. has 1,000 cartons of oranges that were harvested at a cost of $27,400. The oranges can be sold as is for $31,600. The oranges can be processed further into orange juice at an additional cost of $12,625 and be sold at a price of $47,750. The net benefit (additional income) from processing the oranges into orange juice instead of selling as is would be:

O $16,150.

O $(16,150).

O $(3,525).

O $3,525.

Answer 1

The net benefit from processing oranges into orange juice, as opposed to selling them as is, is calculated by subtracting the additional processing costs and the revenue from selling as is from the revenue of selling juice, resulting in a net benefit of $3,525.

Step-by-step explanation:

To calculate the net benefit of processing oranges into orange juice instead of selling them as is, we need to compare the revenues and costs associated with each option. The revenue from selling the oranges as is equals $31,600. If processed into juice, the oranges would sell for $47,750. The additional cost to process the oranges into juice is $12,625. Therefore, the additional net income from processing is calculated as follows:

Revenue from selling juice - Cost of processing - Revenue from selling as is = $47,750 - $12,625 - $31,600 = $3,525.

The net benefit of processing the oranges into juice is therefore $3,525.