Question

Priddy Corporation processes sugar cane in batches. The company purchases a batch of sugar cane for $62 from farmers and then crushes the cane in the company's plant at the cost of $18. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $28 or processed further for $13 to make the end product industrial fiber that is sold for $36. The cane juice can be sold as is for $43 or processed further for $23 to make the end product molasses that is sold for $85. Which of the intermediate products should be processed further? Cane fiber should be processed into industrial fiber: Cane juice should be processed into molasses Cane fiber should NOT be processed into industrial fiber: Cane juice should be processed into molasses TALL Cane fiber should NOT be processed into industrial fiber: Cane juice should NOT be processed into molasses D Cane fiber should be processed into industrial fiber: Cane juice should NOT be processed into molasses D

Answer 1

	Sell as is	Further processing costs	Selling price after processing	Incremental revenue
Cane Fibre	28	13	36	8
Can Juice	43	23	85	42

Cane should not be further processed since incremental sales revenue is less than further processing costs by $5, thus it will result in $5 loss if further processed.

Cane juice should be further processed since incremental revenue is more than further processing cost by $19 ( 42-23) , thus it will increase profit by $19, if processed further.

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