Question

Drew Cane Products, Inc., processes sugar cane in batches. The company buys a batch of sugar cane from farmers for $90 which is then crushed in the company's plant at a cost of $11. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $21 or processed further for $13 to make the end product industrial fiber that is sold for $45. The cane juice can be sold as is for $41 or processed further for $29 to make the end product molasses that is sold for $103.
What is the financial advantage (disadvantage) for the company from processing one batch of sugar cane into the end products industrial fiber and molasses rather than not processing that batch at all?

Answer 1

Answer:

The financial advantages from further processing the batch into two end products is $44.

Explanation:

- The financial advantages from further process can fiber into industrial fiber is calculated as:

  + Price of industrial fiber - price of can fiber - cost of further process into industrial fiber = 45 - 21 - 13 = $11.

- The financial advantages from further process can juice into molasses is calculated as:

  + Price of molasses - price of molasses - cost of further process into molasses = 103 - 29 - 41 = $33.

The total financial advantages from further processing the batch into two end products is calculated as: The financial advantages from further process can fiber into industrial fiber + The financial advantages from further process can juice into molasses = 11 + 33 = $44.