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.Which of the intermediate products should be processed further?
A) Cane fiber should be processed into industrial fiber; Cane juice should be processed into molasses.
B) Cane fiber should be processed into industrial fiber; Cane juice should NOT be processed into molasses.
C) Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be processed into molasses.
D) Cane fiber should NOT be processed into industrial fiber; Cane juice should be processed into molasses.

Question

Quizplus · Accepted Answer

For cane fiber, processing it further into industrial fiber costs an additional $13 but increases its sale price from $29 to $61, resulting in a net gain. For cane juice, processing it further into molasses costs an additional $28 but only increases its sale price from $40 to $67, which does not cover the cost of further processing when considering the initial sale option. Therefore, it's beneficial to process cane fiber further but not cane juice.

Mae Refiners, Incorporated, Processes Sugar Cane That It Purchases from Farmers