VALUE ADDED QUESTION: Halloway Foods is a producer of salad dressings. Halloway's production process proceeds in two steps. First, it purchases crude soybean oil in the open market and, through a process known as fractionation, removes its impurities, thereby creating refined vegetable oil. It then takes the refined vegetable oil and combines it with seasonings and other ingredients and refines it even further to make salad dressing. To produce the 20,000,000 liters of salad dressing, Halloway needed to make 188,235.29 barrels of refined vegetable oil (so the conversion factor is 1 barrel is 106.25 liters). In addition, Halloway produced 120,000 barrels of refined vegetable oil for sale to other food processing companies. To produce its output, Halloway needed to purchase 404,558.80 barrels of crude soybean oil. [The reason you put in more barrels of crude soybean oil than you get out in refined vegetable oil has to do with the fact that impurities are removed in the refining process.] There is an active market for refined vegetable oil, and last year, refined vegetable oil sold for $65 per barrel. (This price is for "unpackaged" vegetable oil that is picked up by the buyer at the seller's plant and loaded directly from the refinery into railroad cars or tank trucks.) A simplified income statement for Halloway is shown below: Revenue Salad dressing sales (20,000,000 liters @ wholesale price of $1.00/liter) $20,000,000 Refined oil sales (120,000 barrels @ price of $65/bbl) $ 7,800,000 Total Revenue $27,800,000 Costs of Goods Sold Cost of crude soybean oil 404,558.80 barrels @ $27/barrel Labor and machine costs in fractionation Costs of salad dressing ingredients Labor and machine costs in salad dressing production Total Cost of Goods Sold $10,923,088 $5,687,500 $2,300,000 $1,100,000 $20,010,588 Salad Dressing Operating Profit: Refined Vegetable Oil Operating Profit: Total Operating Profit $6,456,130 $1,333,283 $7,789,413 ANSWERS: Value Added Salad Dressing Per Liter:_ OPERATING PROFIT $ 7,789,412 Let's define Halloway's value chain to consist of two steps: 1) fractionation and 2) salad dressing production. Below you are given the OPERATING PROFIT for each part of the chain. Please indicate the value added PER LITER for each stage. Note: you need note make very many calculations to get from the figures below to the PER LITER value added. Value Added Refined Vegetable Oil Liter: VALUE ADDED QUESTION: Halloway Foods is a producer of salad dressings. Halloway's production process proceeds in two steps. First, it purchases crude soybean oil in the open market and, through a process known as fractionation, removes its impurities, thereby creating refined vegetable oil. It then takes the refined vegetable oil and combines it with seasonings and other ingredients and refines it even further to make salad dressing. To produce the 20,000,000 liters of salad dressing, Halloway needed to make 188,235.29 barrels of refined vegetable oil (so the conversion factor is 1 barrel is 106.25 liters). In addition, Halloway produced 120,000 barrels of refined vegetable oil for sale to other food processing companies. To produce its output, Halloway needed to purchase 404,558.80 barrels of crude soybean oil. [The reason you put in more barrels of crude soybean oil than you get out in refined vegetable oil has to do with the fact that impurities are removed in the refining process.] There is an active market for refined vegetable oil, and last year, refined vegetable oil sold for $65 per barrel. (This price is for "unpackaged" vegetable oil that is picked up by the buyer at the seller's plant and loaded directly from the refinery into railroad cars or tank trucks.) A simplified income statement for Halloway is shown below: Revenue Salad dressing sales (20,000,000 liters @ wholesale price of $1.00/liter) $20,000,000 Refined oil sales (120,000 barrels @ price of $65/bbl) $ 7,800,000 Total Revenue $27,800,000 Costs of Goods Sold Cost of crude soybean oil 404,558.80 barrels @ $27/barrel Labor and machine costs in fractionation Costs of salad dressing ingredients Labor and machine costs in salad dressing production Total Cost of Goods Sold $10,923,088 $5,687,500 $2,300,000 $1,100,000 $20,010,588 Salad Dressing Operating Profit: Refined Vegetable Oil Operating Profit: Total Operating Profit $6,456,130 $1,333,283 $7,789,413 ANSWERS: Value Added Salad Dressing Per Liter:_ OPERATING PROFIT $ 7,789,412 Let's define Halloway's value chain to consist of two steps: 1) fractionation and 2) salad dressing production. Below you are given the OPERATING PROFIT for each part of the chain. Please indicate the value added PER LITER for each stage. Note: you need note make very many calculations to get from the figures below to the PER LITER value added. Value Added Refined Vegetable Oil Liter