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Mae Refiners, Incorporated, processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $60 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $29 or processed further for $13 to make the end product industrial fiber that is sold for $61. The cane juice can be sold as is for $40 or processed further for $28 to make the end product molasses that is sold for $67.What is the financial advantage (disadvantage) for the company from processing the intermediate product cane juice into molasses rather than selling it as is?
A) ($74) per batch
B) ($14) per batch
C) ($1) per batch
D) ($38) per batch
Intermediate Product
A product that undergoes further processing before it becomes a final good ready for sale to the consumer.
Processed Further
A strategic decision in manufacturing pertaining to the continuation of additional operations or processing on a product to enhance its value.
Financial Advantage
The benefit of having a stronger financial position or undertaking actions that result in financial gain, such as cost savings or increased revenue.
- Assess the financial pros and cons of transforming intermediate products into completed goods.
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Learning Objectives
- Assess the financial pros and cons of transforming intermediate products into completed goods.
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