Question

CocoaJoy processes cocoa beans into cocoa powder at a processing cost of $ 10 comma 100 per batch. CocoaJoy 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 $ 67 comma 000. ​Likewise, the company would incur $ 175 comma 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 $ 10 comma 100 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:

While the president is correct about cocoa podwer the differential gain is higher producing Chocolate Syrup 23,000 agains t 13,000 from the Box assorted product. Thus is incorrect about which final product to convert the cocoa powder

Missing Information:

Revenue from cocoa powder:      14,000

Revenue from Chocolate Syrup 104,000

Revenue from Box assorted       202,000

Explanation:

We solve for the differential gain of each possible product:

Chocolate Syrup

marginal revenue 104,000 - 14,000 = 90,000

marginal cost                                        (67,000)

contribution                                           23,000

Box assorted

marignal revenue 202,000 - 14,000 = 188,000

marginal cost                                        (175,000)

contribution                                             13,000