Boney Corporation processes sugar beets that it purchases from farmers. Sugar be
ID: 2594346 • Letter: B
Question
Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $44 to buy from farmers and $30 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 $14 or processed further for $51 to make the end product industrial fiber that is sold for $99. The beet juice can be sold as is for $62 or processed further for $55 to make the end product refined sugar that is sold for $99.
What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar?
Multiple Choice
$(4) per batch
$18 per batch
$(180) per batch
$28 per batch
Explanation / Answer
Cost of one batch of sugar beets = 44 + 30 = 74
Net profit on sale of industrial fiber = 99 - 51 = 48
Net proffit on sale of refined sugar = 99 - 55 = 44
Total net profit from industrial fiber and refined sugar = 48+44 = 92
Financial advantage for company = 92 - 74 = 18
Answer is $18 per batch