Hayase Corporation Processes Sugar Beets That It Purchases from Farmers

question 126

Multiple Choice

Hayase Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $35 to buy from farmers and $14 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $27 or processed further for $11 to make the end product industrial fiber that is sold for $40. The beet juice can be sold as is for $36 or processed further for $21 to make the end product refined sugar that is sold for $46.
-How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

• A) ($11)
• B) ($25)
• C) ($36)
• D) ($60)

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Definitions:

Dividends Declared

The amount of earnings a company has decided to pay out to its shareholders as dividends.

Diluted Earnings

A company's earnings calculated with the assumption that all convertible securities have been converted into common stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with predetermined dividend payments.

Common Stock

A type of equity security that represents ownership in a corporation, with voting rights and potential dividends.