Question

stinehelfer beet processors, incorporated, processes sugar beets in batches. a batch of sugar beets costs $40 to buy from farmers and $14 to crush in the company's plant. two intermediate products, beet fiber and beet juice, emerge from the crushing process. the beet fiber can be sold as is for $20 or processed further for $12 to make the end product industrial fiber that is sold for $32. the beet juice can be sold as is for $40 or processed further for $38 to make the end product refined sugar that is sold for $74. what is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?

Answer 1

Processing beet juice into refined sugar results in a $4 financial disadvantage due to the costs exceeding the additional revenue. Sugar costs and domestic policies on sugar production have broader economic implications for various industries and global markets.

Step-by-step explanation:

To determine the financial advantage or disadvantage of processing beet juice into refined sugar instead of selling it as is, we analyze the additional costs and revenue from further processing. If beet juice is sold as is, it sells for $40. If processed further, it incurs an additional cost of $38 to make refined sugar, which then sells for $74. The difference in revenue is $74 - $40 = $34, and the additional cost is $38. Therefore, the financial disadvantage of processing further is $38 - $34 = $4.

Considering the broader context of sugar production and marketing, sugar costs are significant from an economic standpoint.

High fructose corn syrup (HFCS) has replaced traditional sugars due to cost advantages, with corn being plentiful in the US, driving supply up and costs down. Additionally, the US government's support for domestic sugar farmers with price floors and quotas has maintained higher sugar prices domestically compared to the world market, impacting consumers, the candy industry, and foreign sugar producers.