Sold as Is or Processed Further Into an End Prduct?Geballe Industries is a division of a major corporation.
Last year the division had total sales of $21,420,000, net operating income of
$2,270,520, and average operating assets of $6,000,000. The company’s minimum
required rate of return is 10%.QuestionWhat is the division’s margin?What is the division’s turnover?What is the division’s return on investment (ROI)?2.Prevatte 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 $45 to buy from farmers and $11
to peel in the company’s plant. The peels produced from a batch can be sold as
is for animal feed for $27 or processed further for $16 to make the cocktail of
nutrients that are sold for $47. The depeeled spuds can be sold as is for $38
or processed further for $27 to make frozen french fries that are sold for $59.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? Show your work!
b. Should each of the intermediate products, peels and
depeeled spuds, be sold as is or processed further into an end product?
Explain.
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