Question
Steins' Dairy processes 4,000 hectolitres (hL) of fluid raw milk per month. One hectolitre equals 100 litres. After the raw milk is received at the
Steins' Dairy processes 4,000 hectolitres (hL) of fluid raw milk per month. One hectolitre equals 100 litres. After the raw milk is received at the dairy it is separated by machines into cream and liquid skim milk. The cost of processing the 4,000 hL of raw milk up to the split off point to yield 1,000 hL of cream and 3,000hL of liquid skim milk is $345,000. The selling price of cream is $155.00 per hectolitre and the selling price of liquid skim milk is $75.00 per hectolitre. Steins` Dairy has the opportunity to process further all of its liquid skim milk production into condensed milk which will sell for $310 per hL. The cost of processing 3,000hL of skim milk to net 2,000 hL of condensed milk is $270,000. Should Steins` sell the liquid skim milk or process it into condensed milk. Show the expected net revenue difference between the two alternatives.
Process further income of $45,000 | ||
Do not process further loss $125,000 | ||
Process further income of $125,000 | ||
Process further income of $320,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started