Resendes Refiners, Inc., processes sugar cane that it purchases from farmers. Su

Question

Resendes Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $48 to buy from farmers and $16 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $24 or processed further for $17 to make the end product industrial fiber that is sold for $38. The cane juice can be sold as is for $34 or processed further for $23 to make the end product molasses that is sold for $76. How much profit (loss) does the company make by processing one batch of sugar cane into the end products industrial fiber and molasses? A) $16 B) $(104) C) $(6) D) $10

Explanation / Answer

Cane fiber Profit without processing = $21- 0 = $21 Profit with processing = $43 -$12 = $31 Cane fiber should be processed Cane Juice Profit without processing = $47- 0 = $47 Profit with processing = $88 -$21 = $67 Cane Juice should be processed If you have to choose only one intermediate product then Cane Juice should be processed

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