Question
In: Accounting
Bow Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches....
- Bow Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 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 $25 or processed further for $16 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79. You may assume Bow has NO fixed costs.
Required:
How much is the financial advantage or disadvantage (clearly indicate whether it is an advantage or disadvantage) of processing beet fiber into industrial fiber?
How much is the financial advantage or disadvantage (clearly indicate whether it is an advantage or disadvantage) of processing beet juice into beet sugar? Assume that instead of buying beets from farmers and crushing them, Bow can instead purchase beet juice for $32, process it for $28 and sell refined sugar as its only product for $79.
How much would be the financial advantage or disadvantage (clearly indicate whether it is an advantage or disadvantage) of ceasing crushing operations and the processing/sale of industrial fiber?
Solutions
Expert Solution
1.)
Sales price before processing- old (beet fiber) = $25
Sales price of industrial fiber-new =$39
Incremental cost = $16
Financial advantage/disadvantage = New selling price – incremental cost – Old selling price
= $39 - $16 -$25
= -$2
Therefore, financial disadvantage of processing beet fiber into industrial fiber is $2.
2.)
Sales price before processing- old (beet juice) = $32
Sales price of refined sugar-new =$79
Incremental cost = $28
Financial advantage/disadvantage = New selling price – incremental cost – Old selling price
= $79 - $28 -$32
= $19
Therefore, financial advantage of processing beet juice into refined sugar is $19.
3.)
- Net advantage from crushing operations and further processing
= Disadvantage from industrial fiber + Advantage from refined sugar
= -$2 + $19 = $17 advantage
- Financial advantage or disadvantage from purchasing beet juice instead of crushing:
Cost of beet juice = $32
Sales price of refined sugar-new =$79
Incremental cost = $28
Financial advantage or disadvantage= Sales price – initial cost – incremental cost
= $79 - $28 -$32
=$19
- The financial advantage or disadvantage of ceasing crushing operations and the processing/sale of industrial fiber:
= Financial advantage or disadvantage from purchasing beet juice instead of crushing - Net advantage from crushing operations and further processing
= $19 - $17
=$2 Advantage
ekkarill92 answered 2 years agoRelated Solutions
Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches....
Boney Corporation processes sugar beets that it purchases from
farmers. Sugar beets are processed in batches. A batch of sugar
beets costs $53 to buy from farmers and $18 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 $25 or processed further for $18 to make the end product
industrial fiber that is sold for $39. The beet juice can be...
Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches....
Boney Corporation processes sugar beets that it purchases from
farmers. Sugar beets are processed in batches. A batch of sugar
beets costs $62 to buy from farmers and $21 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 $32 or processed further for $33 to make the end product
industrial fiber that is sold for $81. The beet juice can be...
Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches....
Sohr Corporation processes sugar beets that it purchases from
farmers. Sugar beets are processed in batches. A batch of sugar
beets costs $47 to buy from farmers and $33 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 $30 or processed further for $35 to make the end product
industrial fiber that is sold for $105. The beet juice can be...
Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches....
Boney Corporation processes sugar beets that it purchases from
farmers. Sugar beets are processed in batches. A batch of sugar
beets costs $47 to buy from farmers and $10 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 $15 or processed further for $14 to make the end product
industrial fiber that is sold for $59. The beet juice can be...
Stinehelfer Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets costs $60...
Stinehelfer Beet Processors, Inc., processes sugar beets in
batches. A batch of sugar beets costs $60 to buy from farmers and
$22 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 $36 or processed further for $28
to make the end product industrial fiber that is sold for $48. The
beet juice can be sold as is for $56 or processed...
Harper Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and...
Harper Chicken Corporation processes and packages chicken for
grocery stores. It purchases chickens from farmers and processes
them into two different products: chicken drumsticks and chicken
steak. From a standard batch of 12,000 pounds of raw chicken that
costs $7,000, the company produces two parts: 2,800 pounds of
drumsticks and 4,200 pounds of breast for a processing cost of
$2,450. The chicken breast is further processed into 3,200 pounds
of steak for a processing cost of $2,000. The market price...
Stuart Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and...
Stuart Chicken Corporation processes and packages chicken for
grocery stores. It purchases chickens from farmers and processes
them into two different products: chicken drumsticks and chicken
steak. From a standard batch of 17,000 pounds of raw chicken that
costs $9,250, the company produces two parts: 3,400 pounds of
drumsticks and 5,700 pounds of breast for a processing cost of
$6,502. The chicken breast is further processed into 4,900 pounds
of steak for a processing cost of $2,900. The market price...
Rooney Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and...
Rooney Chicken Corporation processes and packages chicken for
grocery stores. It purchases chickens from farmers and processes
them into two different products: chicken drumsticks and chicken
steak. From a standard batch of 16,000 pounds of raw chicken that
costs $8,950, the company produces two parts: 3,000 pounds of
drumsticks and 4,800 pounds of breast for a processing cost of
$4,085. The chicken breast is further processed into 4,000 pounds
of steak for a processing cost of $2,700. The market price...
H3 Co. is a farming corporation that grows and sells sugar beets. The company is publicly...
H3 Co. is a farming corporation that grows and sells sugar
beets. The company is publicly traded on the stock market: however,
management prefers to use variable costing for decision purposes.
The company's books are adjusted to arrive at Absorption Income for
financial reporting purposes. The company reported the following
financial information for the past month:
Variable Net Income:
$2,000,000
Sales:
5,000 truckloads of sugar beets
Fixed manufacturing costs rate per truckload:
$500
Variable SGA costs per truckload:
$100
Fixed...
wagger Corporation purchases potatoes from farmers. The potatoes are then peeled, producing two intermediate products-peels and...
wagger Corporation purchases potatoes from farmers. The potatoes
are then peeled, producing two intermediate products-peels and
depeeled spuds. The peels can then be processed further to make a
cocktail of organic nutrients. And the depeeled spuds can be
processed further to make frozen french fries. A batch of potatoes
costs $48 to buy from farmers and $14 to peel in the company's
plant. The peels produced from a batch can be sold as is for animal
feed for $30 or...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 1. What is the historical role of investment bankers ? Has this role changed ? Why...
- How were the original Internet requirements met through its design? What are the two main requirements...
- discuss crowdfunding on platforms: What features of the services incorporate virality? What are some of the...
- A textbook of mass 2.08 kg rests on a frictionless, horizontal surface. A cord attached to...
- Describe a time when someone did not really listen to or understand a point you were...
- Enumerations Create an advanced enumeration to represent months (JANUARY – DECEMBER) called enuMonths Add internal properties...
- What is the minimum size of the automorphism group of a simple directed graph having more...
ADVERTISEMENT