Question

Coakley Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets costs $43 to buy from farmers and $17 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 $19 or processed further for $11 to make the end product industrial fiber that is sold for $31. The beet juice can be sold as is for $39 or processed further for $41 to make the end product refined sugar that is sold for $77. How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

Answer 1

$3 less

Step-by-step explanation:

Sales value after processing into refined sugar = $77

Cost of processing into refined sugar = $41

Profit per unit from refined sugar = $77 - $41 = $36

Profit per unit before processing of beet juice = $39

Hence, the company makes $3 less ($39 - $36) if it processes the beef juice into refined sugar than selling as it is. It is advisable not to spend resources on conversion of beet juice into refined sugar but instead to sell as it is.