Cocoaheaven processes cocoa beans into cocoa powder at a processing cost of $9,500 per batch. Cocoaheaven 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:
Cocoa powder......................................... $ 16,500
Chocolate syrup ...................................... $102,000
Boxed assorted chocolates....................... $196,000
The cost of transforming the cocoa powder into chocolate syrup would be $70,000. Likewise, the company would incur a cost of $176,000 to transform the cocoa powder into boxed assorted chocolates. The company president has decided to make boxed assorted chocolates due to its high sales value and to the fact that the cocoa bean processing cost of $9,500 eats up most of the cocoa powder profits.
Requirement
1. Has the president made the right or wrong decision? Explain your answer. Be sure to include the correct financial analysis in your response.