Question

ChocoliciousChocolicious processes cocoa beans into cocoa powder at a processing cost of $ 9 comma 700$9,700 per batch. ChocoliciousChocolicious can sell the cocoa powder as​ is, or it can process the cocoa powder further into chocolate syrup or boxed assorted chocolates. Once​ processed, each batch of cocoa beans would result in the following sales​ revenue: LOADING...​(Click the icon to view the sales​ revenue.) The cost of transforming the cocoa powder into chocolate syrup would be $ 65 comma 000$65,000. ​Likewise, the company would incur $ 175 comma 000$175,000 to transform the cocoa powder into boxed assorted chocolates. The company president has decided to make boxed assorted chocolates owing to its high sales value and to the fact that the $ 9 comma 700$9,700 cost of processing cocoa beans​ "eats up" most of the cocoa powder profits. Has the president made the right or wrong​ decision? Explain your answer.

Answer 1

Answer:

The company president made the wrong decision. They should have produce the chocolate syrup, as it makes more profit per batch.

The product that gives more revenue per batch of cocoa beans is the chocolate syrup (Revenue=$29,300), not the box assorted chocolates (Revenu=$17,300). So the production should have gone to producing chocolate syrup.

Explanation:

The question is incomplete:

- Once​ processed, each batch of cocoa beans would result in the following sales​ revenue:

Cocoa powder: $14,000

Chocolate syrup: $104,000

Box assorted chocolates: $202,000

The cost of post-processing the cocoa powder into chocolate syrup is $65,000.

The cost of post-processing the cocoa powder into box assorted chocolates is $175,000.

The revenue for every product is

Revenue = Sales - Cost of processing

Revenue Cocoa powder

$R=14,000-9,700=4,300$

Revenue Chocolate syrup

$R=104,000-(9,700+65,000)=104,000-74,700=29,300$

Revenue Box assorted chocolates

$R=202,000-(9,700+175,000)=202,000-184,700=17,300$

The product that gives more revenue per batch of cocoa beans is the chocolate syrup (Revenue=$29,300), not the box assorted chocolates (Revenu=$17,300). So the production should have gone to producing chocolate syrup.