Answer:
The Beet Juice should be processed further
Explanation:
<em>A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost. </em>
<em>Also note that all cost incurred up to the point of crush are irrelevant to the decision to process further </em>
Product Additional Rev. Further process cost. Net income(loss)
($)
Beet Fiber 40-27 =13 16 (3) See notes
Beet Juice 100- 43 = 57 28 29
The beet fiber should not be process further while the beet juice should be be processed further into refined sugar . Processing Beet Juice further will generate additional income of $29 per unit while Beet Fiber would generate a loss of $(3)
Notes
The net income(loss) is the difference between the additional revenue from further processing and the further processing cost. The Net income(loss) for the two products is computed as follows:
Beet Fiber =13- 16 = (3)
Beet Juice = 57 - 28 = 29