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A manufacturer of breakfast cereals has the opportunity to purchase barley at $3.00 a kilo for 10,000 kilos, if it also buys 5000 kilos of
A manufacturer of breakfast cereals has the opportunity to purchase barley at $3.00 a kilo for 10,000 kilos, if it also buys 5000 kilos of wheat at $16.00 per kilo. However, the manufacturer does not use any barley in its products, and currently needs 20,000 kilos of wheat. If the current market price of barley is $3.80 per kilo, and wheat is $15.80 per kilo, should this opportunity be taken, and why?
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