Accounting - Batch Production; Decision to Process Further
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Dolce Refinery, Inc. processes coconuts. Coconuts are processed in batches. A batch of coconuts costs $60 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, coconut fiber and coconut oil, emerge from the crushing process. The coconut 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 coconut oil can be sold as is for $40 or processed further for $28 to make the end product coconut juice drink that is sold for $67.
Dear OTA please help me in analyzing these questions:
1. How much profit (loss) does the company make by processing one batch of coconuts into the end products industrial Fiber and "Coconut Juice Drink"?
2. How much profit (loss) does the company make by processing the intermediate product coconut oil into "Coconut Juice Drink" RATHER than selling it as is?
3. Which of the intermediate products (Fiber or coconut oil) should be processed further?
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- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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