Question

Vannorman Corporation processes sugar beets in batches. A batch of sugar beets costs $78 to buy from farmers and $18 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 $25 or processed further for $16 to make the end product industrial fiber that is sold for $57. The beet juice can be sold as is for $39 or processed further for $22 to make the end product refined sugar that is sold for $84. How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all? Multiple Choice ($134) ($32) $7 $39

Answer 1

Answer:

Sugar    

Beets    

-$ 78,0 Farmers  

-$ 18,0 Crush Into the Company

               Beet Fiber Beet Juice

-$ 96,0 -$ 16,0           -$ 22,0 Processed further

        $ 57,0       $ 84,0 Price

$ 7,0 -$ 7,0       $ 14,0 Profit/Loss

Explanation:

If the company process one batch at all it will be profit for one product and loss to other.  

In the case of the Beet Fiber the company get a loss of ($7) and with the Beet Juice get a profit of $14

The difference it´s in the contribution margin of each product, the Beet Juice has a better margin than Beet Fiber  this let the Beet Fiber in better conditions to cover the cost of processing the Sugar Beet which are share 50/50 with the Beet Fiber.