Vannorman Corporation processes sugar beets in batches. A batch of sugar beets costs $78 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 $57. The beet juice can be sold as is for $39 or processed further for $22 to make the end product refined sugar that is sold for $84. How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?
Only the differential costs will be considered. Therefore, the costs associated with sugar beets and their processing are not relevant to the decision.
Beet fiber:
Sold as is for $25
Continued processing yields = 57 - 16= $41
It is more favorable to further process the beet fiber.
Beet juice:
Sold as is for $39
Continued processing yields = 84 - 22= $62
Continuing the processing of beet juice is also more advantageous.
No, Mike presented the ratio based on the change compared to the new amount. He ought to have utilized the ratio of the change against the original amount, which is represented as 55/275, or 20%.
