Sohr Corporation processes sugar beets that it purchases from farmers. Sugar bee
ID: 2479750 • Letter: S
Question
Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $56 to buy from farmers and $15 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $26 or processed further for $21 to make the end product industrial fiber that is sold for $69. The beet juice can be sold as is for $47 or processed further for $25 to make the end product refined sugar that is sold for $69.
How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?
Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $56 to buy from farmers and $15 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $26 or processed further for $21 to make the end product industrial fiber that is sold for $69. The beet juice can be sold as is for $47 or processed further for $25 to make the end product refined sugar that is sold for $69.
Explanation / Answer
Particulars
Beet Fiber
Beet Juice
Sales Further Processing
69
69
Less: Sales at Split off Point
(26)
(47)
Incremental Revenue
43
22
Less : Additional Processing Cost
(21)
(25)
Incremental Profit
22
(3)
Profit by processing Sugar Beets= $22
Loss by Processing Sugar Juice to end Product Refined Sugar= $3
Hence Sugar beets is advisable to further process and Sugar juice to sell at split off Point
Particulars
Beet Fiber
Beet Juice
Sales Further Processing
69
69
Less: Sales at Split off Point
(26)
(47)
Incremental Revenue
43
22
Less : Additional Processing Cost
(21)
(25)
Incremental Profit
22
(3)
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