Farrugia Corporation Produces Two Intermediate Products,A and B,from a Common

question 49

Essay

Farrugia Corporation produces two intermediate products,A and B,from a common input.Intermediate product A can be further processed into Product X.Intermediate product B can be further processed into Product Y.The common input is purchased in batches that cost $36 each and the cost of processing a batch to produce intermediate products A and B is $15.Intermediate product A can be sold as is for $21 or processed further for $14 to make Product X that is sold for $32.Intermediate product B can be sold as is for $44 or processed further for $28 to make Product Y that is sold for $64.
Required:
a.Assuming that no other costs are involved in processing the common input or in selling products,what is the profit (loss)from processing one batch of the common input into the products X and Y? Show your work!
b.Should each of the intermediate products,A and B,be sold as is or processed further? Explain.

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Definitions:

Doubling Times

The period of time required for a quantity to double in size or value, often used in the context of population growth or bacterial cell reproduction.

Total Fertility Rate

The average number of children born to a woman during her lifetime.

Born

The process of coming into life or entering into existence.

K-strategists

Species that produce fewer offspring, with a focus on long term survival and quality of upbringing, often in stable environments.