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Decision Making at Apple Country Orchards: Raw Apples vs. Apple Cider

Explore the financial and qualitative considerations faced by Apple Country Orchards in deciding to sell raw Granny Smith apples or produce apple cider from them. Calculate the cost-benefit analysis and delve into the qualitative factors influencing their decision-making process.

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Decision Making at Apple Country Orchards: Raw Apples vs. Apple Cider

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  1. Should Apple Country Orchards sell Granny Smith apples or make cider from those apples? Original blog posting (December 3, 2013)

  2. Apple Country Orchards makes cider from several different apple varieties • Granny Smith apples are known for its ability to be easily preserved in storage for up to a year and for its high antioxidant activity • Granny Smith apples are sold for $0.90 per pound • One gallon of fresh-pressed cider (about 8 pounds of apples) sells for $8

  3. Question 1 Do you need to know the cost per pound that Apple Country Orchards uses for its Granny Smith apples to be able to decide if the Granny Smith apples should be sold as is (as raw apples) or processed further into cider, pie, turnovers, or any other apple product?  Why or why not?

  4. Question 2 From a purely quantitative standpoint, should Apple Country Orchards sell raw Granny Smith apples or process those apples further into apple cider?  Support your answer with calculations.

  5. Question 3 Assume that it is financially advantageous to sell raw apples rather than process them further into cider.  What qualitative factors might influence Apple Country Orchards’ decision to offer fresh-pressed cider?

  6. Question Recap • Do you need to know the cost per pound that Apple Country Orchards uses for its Granny Smith apples to be able to decide if the Granny Smith apples should be sold as is (as raw apples) or processed further into cider, pie, turnovers, or any other apple product?  Why or why not? • From a purely quantitative standpoint, should Apple Country Orchards sell raw Granny Smith apples or process those apples further into apple cider?  Support your answer with calculations. • Assume that it is financially advantageous to sell raw apples rather than process them further into cider.  What qualitative factors might influence Apple Country Orchards’ decision to offer fresh-pressed cider?

  7. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/Related video resources can be found at http://www.youtube.com/user/accountingheadlinesQuestions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu

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