Heinz Uses 2000 Tons of Corn Syrup Each Year as an Ingredient

question 23

Multiple Choice

Heinz uses 2000 tons of corn syrup each year as an ingredient in its tomato ketchup products.Heinz is concerned about the increase in prices of corn-based products and purchases a fixed-price contract to buy corn syrup at $20,000 per ton.What is the impact on earnings before taxes as opposed to no hedging if the price of corn is $15,000 per ton over the next year?

• A)+$5 million
• B)-$10 million
• C)$0
• D)+$10 million
• E)-$5 million

---

Definitions:

Consolidation Purposes

The objective of amalgamating financial statements from various entities within a single corporate group to present a unified financial position and results of operations.

Eliminate Unrecognized

A process in accounting, often related to consolidation, where unrealized profits, losses, or transactions within or among entities are removed from financial statements.

Intra-entity Gross Profit

The profit recognized on transactions conducted within the same entity, which may need to be eliminated in consolidated reporting.

Intra-entity Gross Profit

The profit recognized from transactions within the same company, affecting consolidated financial statements.