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. Which of the intermediate products should be processed further?

A) Cane fiber should NOT be processed into industrial fiber; Cane juice should be processed into molasses

B) Cane fiber should be processed into industrial fiber; Cane juice should be processed into molasses

C) Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be processed into molasses

D) Cane fiber should be processed into industrial fiber; Cane juice should NOT be processed into molasses

Explanation / Answer

Can Fiber Can Juice Sales value after further processing $38 $76 Less: Cost of Further Processing -$17 -$23 Benefit of Further Processing $21 $53 Less: Sales value at split off point -$24 -$34 Net Advantage/(Disadvantage) -$3 $19 A) Cane fiber should NOT be processed into industrial fiber; Cane juice should be processed into molasses

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