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In: Accounting

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 further for $34 to make the end product refined sugar that is sold for $82. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is? Multiple Choice

($43)

$60

($8)

$14

Solutions

Expert Solution

Selling Price of Beat Juice before further processing =     $ 56

Further processing Cost                  = $ 34

Total Cost =Further Processing Cost + Selling Price of Beat Juice before further processing

                   = $ 56 + $ 34

                  

                   = $ 90

(Note : Selling Price of Beat Juice before further processing is included in Total Cost because if Stinehelfer Beet Processors before further processing sells the Beat Juice they can get $ 56.It is Opportunity Cost hence it shall be added in Total Cost.)

Further Processing Selling Price = $ 82

(-) Total Further Processing Cost = (- $ 90 )
_______________________________________

Loss on Further processing = (-$ 8)

Therefor Disadvantage of further processing of Beat Juice into refined sugar is = (-$ 8)

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ekkarill92 answered 2 years ago
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