Sell or Process Further Abica Roast Coffee Company produces Columbian coffee in

Question

Sell or Process Further Abica Roast Coffee Company produces Columbian coffee in batches of 6,700 pounds. The standard quantity of materials required in the process is 6,700 pounds, which cost $4.00 per pound. Columbian coffee can be sold without further processing for $9.40 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $10.00 per pound. The processing into Decaf Columbian requires additional processing costs of $8,450 per batch. The additional processing will also cause a 6% loss of product due to evaporation. Hide a. Prepare a differential analysis dated August 28, 2014, on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). Differential Analysis Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2) August 28, 2014 Sell Regular Columbian (Alternative 1) Process Further into Decaf Columbian (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs Income (Loss) $ $ $ b. Should Abica Roast sell Columbian coffee or process further and sell Decaf Columbian? SelectSell ColumbianProcess into Decaf Columbian c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian. Round your answer to two decimal places. $ per pound

Explanation / Answer

Solution :

a..

Sell Regular Columbian (Alternative 1)

Process Further into Decaf Columbian (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues

62980

62980

0

(6700*9.4)

(6700*0.94*10)

Costs

26800

35250

8450

(6700*4)

6700*4+(8450)

Income (Loss)

36180

27730

-8450

b. Abica Roast should not process further as it results in loss.

c..

Income under sell without further process

36180

Add : cost under further process

35250

Revenue should be

71430

batch size after 6% loss (6700*94%)

6298

Price to break even (71430/6298)

                                 11.34

a..

Sell Regular Columbian (Alternative 1)

Process Further into Decaf Columbian (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues

62980

62980

0

(6700*9.4)

(6700*0.94*10)

Costs

26800

35250

8450

(6700*4)

6700*4+(8450)

Income (Loss)

36180

27730

-8450

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.