Question
Good Earth Products produces orange juice and candied orange peels. A 1,000-pound batch of oranges, costing $480, is transformed using labor of $50 into 100
Good Earth Products produces orange juice and candied orange peels. A 1,000-pound batch of oranges, costing $480, is transformed using labor of $50 into 100 pounds of orange peels and 310 pints of juice. The company has determined that the sales value of 100 pounds of peels at the split-off point is $360, and the value of a pint of juice (not pasteurized or bottled) is $0.4. Beyond the split-off point, the cost of sugar-coating and packaging the 100 pounds of peels is $60. The cost of pasteurizing and packaging the 310 pints of juice is $240. A 100-pound box of candied peels is sold to commercial baking companies for $590. Each pint of juice is sold for $1.68. What is the incremental benefit (cost) to the company of sugar-coating the peels rather than selling them in their condition at the split-off point?
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