Answered: Cocoa powder Chocolate syrup Boxed…

Business

Accounting

Cocoa powder Chocolate syrup Boxed assorted chocolates $ 14,500 103,000 204,000

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 20SP: Begin with the partial model in the file Ch02 P20 Build a Model.xlsx on the textbook’s Web...

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Question

Making sell or process further decisions

Heavenly Dessert processes cocoa beans into cocoa powder at a processing cost of $9,700 per batch. Heavenly Dessert can sell the cocoa powder as is, or it can process the cocoa powder further into either chocolate syrup or boxed assorted chocolates. Once processed, each batch of cocoa beans would result in the following sales revenue:

The cost of transforming the cocoa powder into chocolate syrup would be $72,000. Likewise, the company would incur a cost of $183,000 to transform the cocoa powder into boxed assorted chocolates. The company president has decided to make boxed assorted chocolates due to their high sales value and to the fact that the cocoa be processing cost of $9,700 eats up most of the cocoa powder profits.

Has the president made the right or wrong decision? Explain your answer. Be sure to include the correct financial analysis in your response.

Cocoa powder
Chocolate syrup
Boxed assorted chocolates
$ 14,500
103,000
204,000

Definition Definition Operation costing method employed to determine the value of a product at each process or stage of the production process, applicable where goods produced from a series of continuous operations or procedure. Process costing is employed by businesses that manufacture goods and where production is in repetitive inflow.

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Decision to Sell before or after additional processing

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