Heavenly Dessert processes cocoa beans into cocoa powder at a processing cost of $9,500 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: 1​(Click the icon to view the sales revenue amounts and additional​ information.)   Has the president made the right or wrong​ decision? Explain your

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Heavenly Dessert
processes cocoa beans into cocoa powder at a processing cost of
$9,500
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:
1​(Click
the icon to view the sales revenue amounts and additional​ information.)
 
Has the president made the right or wrong​ decision? Explain your answer. Be sure to include the correct financial analysis in your response.
 
Begin by completing the following incremental analysis to compare selling the cocoa powder as is with processing it further. ​(For amounts with a value of​ $0, make sure to enter​ "0" in the appropriate input​ box.)
 
 
Sell as Cocoa Powder
Sell as Chocolate Syrup
Sell as Boxed Assorted Chocolates
Revenue
 
 
 
Less: Additional processing costs
 
 
 
Net benefit
 
 
 
Has the president made the right or wrong​ decision? Explain your answer.
 
The president has made the
(1) 
 
 
decision. Based on the analysis​ above, the company would realize the highest profits by
(2) 
 
 
1: Data Table
Cocoa powder
$13,500
Chocolate syrup
96,000
Boxed assorted chocolates
194,000
 
The cost of transforming the cocoa powder into chocolate syrup would be
$65,000.
​Likewise, the company would incur a cost of
$177,000
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.
(1) 
 
 right
 
 wrong
(2) 
 
 processing the cocoa powder into boxed chocolates.
 
 processing the cocoa powder into chocolate syrup.
 
 selling the cocoa powder as is.
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