Module Two Problem Set

Question 17 of 17

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Splish & Sons produces tomato juice and tomato puree from fresh tomatoes grown by local farmers. The company purchases large crates of tomatoes and then washes, sorts, scalds, peels, and crushes them, at which point the juice and the pulp are separately identifiable. Splish currently processes the pulp further to transform it into his great-great-grandmothers secret-recipe spaghetti sauce. The specifics on each of these products for one month are as follows.

Joint processing costs		$154,000
Quantity of tomato juice produced		7,000	gallons
Value of tomato juice		$2	per gallon
Quantity of tomato puree produced		16,000	pounds
Additional cost to make spaghetti sauce		$21,000
Final sales value of spaghetti sauce		$219,000

Assuming that Splish could otherwise sell the tomato puree as-is for $171,000 (instead of turning it into spaghetti sauce), would you recommend that he process both of these products past the split-off point? Show how much better or worse off Splish would be if the puree and the juice are both processed further.

		Juice		Puree
Net benefit		$		$

Splish & Sons is, therefore better off by a total of $ by processing both products beyond the split-off point.

Splish \& Sons produces tomato juice and tomato puree from fresh tomatoes grown by local farmers. The company purchases large crates of tomatoes and then washes, sorts, scalds, peels, and crushes them, at which point the juice and the pulp are separately identifiable. Splish currently processes the pulp further to transform it into his great-great-grandmother's secret-recipe spaghetti sauce. The specifics on each of these products for one month are as follows. Your answer is partially correct. Assuming that Splish could otherwise sell the tomato puree as-is for $171,000 (instead of turning it into spaghetti sauce), would you recommend that he process both of these products past the split-off point? Show how much better or worse off Splish would be if the puree and the juice are both processed further. Splish \& Sons is therefore point. by a total $ by processing both products beyond the split-off