Company buys locally-grown frumkins ( a made-up vegetable) and produces frumkin products. The frumkin seeds are a high priced delicacy. To harvest the seeds, the frumkins must be chopped into chunks.

• It costs $15 to purchase a frumkin and process it into a unit of frumkin chunks and a unit of frumkin seeds. These are sold in bulk to a distributor.
  • Company has allocated the cost according to weight of the units: $10 to the chunks and $5 to the seeds.
• A unit of chunks can be sold as is for $6. a unit of seeds sells for $20.

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Historically, Company sells 1,000 units of chunks and 1,000 units of seeds to the distributor each month. The distributor has asked if Company is willing to sell frumkin puree instead of frumkin chunks.

• Company can process a unit of chunks into a unit of puree for $2. The restaurant will pay $9 for a unit of puree.

After considering the costs as detailed above, Company is considering 2 alternatives, starting next month: Option A: Convert all of the chunks to puree. Sell seeds and puree. Option B: Only sell the seeds. The chunks will be composted (at no cost to Company)

Compared to the current approach, which of the following is true?

Company buys locally-grown frumkins ( a made-up vegetable) and produces frumkin products. The frumkin seeds are a high priced delicacy. To harvest the seeds, the frumkins must be chopped into chunks.

• It costs $15 to purchase a frumkin and process it into a unit of frumkin chunks and a unit of frumkin seeds. These are sold in bulk to a distributor.
  • Company has allocated the cost according to weight of the units: $10 to the chunks and $5 to the seeds.
• A unit of chunks can be sold as is for $6. a unit of seeds sells for $20.

This content is copyrighted

Historically, Company sells 1,000 units of chunks and 1,000 units of seeds to the distributor each month. The distributor has asked if Company is willing to sell frumkin puree instead of frumkin chunks.

• Company can process a unit of chunks into a unit of puree for $2. The restaurant will pay $9 for a unit of puree.

After considering the costs as detailed above, Company is considering 2 alternatives, starting next month: Option A: Convert all of the chunks to puree. Sell seeds and puree. Option B: Only sell the seeds. The chunks will be composted (at no cost to Company)

Compared to the current approach, which of the following is true?

Option A will increase monthly profit by $3,000.

Option B will increase monthly profit by $4,000.

Option A will decrease monthly profit by $1,000.

Option A will increase monthly profit by $1,000.