McBee Corporation purchases potatoes from farmers. The potatoes are then
peeled, producing two intermediate products-peels and depeeled spuds. The peels
can then be processed further to make a cocktail of organic nutrients. And the
depeeled spuds can be processed further to make frozen french fries. A batch of
potatoes costs P35 to buy from farmers and P19 to peel in the company's plant.
The peels produced from a batch can be sold as is for animal feed for P24 or
processed further for P14 to make the cocktail of nutrients that are sold for P48.
The depeeled spuds can be sold as is for P34 or processed further for P29 to make
frozen french fries that are sold for P55.
Required:
a. Assuming that no other costs are involved in processing potatoes or in selling
products, how much money does the company make from processing one batch of
potatoes into the cocktail of organic nutrients and frozen french fries?
b. Should each of the intermediate products, peels and depeeled spuds, be sold as
is or processed further into an end product?
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