Chocoheaven processes cocoa beans into cocoa powder at a processing cost of $ 10,100 per batch. Chocoheaven can sell the cocoa powder as is, or it can process the cocoa powder further into chocolate syrup or boxed assorted chocolates. Once processed, each batch of cocoa beans would result in the following sales revenue: 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 "O" in the appropriate input box.)
Sell as Sell as Sell as Boxed
Cocoa Chocolate Assorted
Powder Syrup Chocolates
Revenue
Less: Additional processing costs
Net benefit
Cocoa powder $ 14,000
Chocolate syrup 104,000
Boxed assorted chocolates 202,000
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 S9,500 eats up most of the cocoa powder profits.