Asked by Queen Owusu on Jul 02, 2024
Swagger Corporation purchases potatoes from farmers.The potatoes are then peeled, producing two intermediate products-peels and depeeled spuds.The peels can then be processed further to make a cocktail of organic nutrients.And the depeeled spuds can be processed further to make frozen french fries.A batch of potatoes costs $63 to buy from farmers and $12 to peel in the company's plant.The peels produced from a batch can be sold as is for animal feed for $29 or processed further for $15 to make the cocktail of nutrients that are sold for $41.The depeeled spuds can be sold as is for $40 or processed further for $22 to make frozen french fries that are sold for $77.
Required:
a.Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries? Show your work!
b.Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further into an end product? Explain.
Intermediate Products
Products that are in a semi-finished state; they require further processing before becoming final goods sold to the end consumer.
Cocktail of Nutrients
A mixture or combination of different nutrients, often used to improve health, enrich diets, or enhance the growth of organisms.
Frozen French Fries
Pre-cut and pre-cooked potatoes that are frozen for ease of storage and preparation, often used as a quick food service item or retail product.
- Perceive the theory of joint processing and resolve on either continuing processing or selling at a split-off point.
Learning Objectives
- Perceive the theory of joint processing and resolve on either continuing processing or selling at a split-off point.