Sell or Process Further Zing Roast Coffee Company produces Columbian coffee in b

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Sell or Process Further

Zing Roast Coffee Company produces Columbian coffee in batches of 5,100 pounds. The standard quantity of materials required in the process is 5,100 pounds, which cost $5.00 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 $8,950 per batch. The additional processing will also cause a 6% loss of product due to evaporation.

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 Zing Roast sell Columbian coffee or process further and sell Decaf Columbian?
SelectSell ColumbianProcess into Decaf ColumbianCorrect 1 of Item 2

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

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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)

$  

$  

$  

Explanation / Answer

Alternative-1:

Revenue= No of pounds*Selling price per pound=5100*9.4=$47,940
Costs=No of pounds*cost per pound=5100*5=25,500
Income=47940-25500=$22,440

Alternative 2:

Revenue= No of pounds*Selling price per pound= (5100*0.94)*10=$47,940
Costs=(No of pounds*cost per pound)+ processiong costs=(5100*5)+8950=$34,450
Income=47940-34450=$13,490

Differential Effect:
Revenue=47940-47940=$0
Costs=34450-25500=$8,950
Income=13940-22440= -$8,950

b)It should not process and sell like normal columbia coffee

c)Let The price of Decaf columbian should be "x". Equating selling price = cost price for break even price.

(5100*0.94)x=34450
x=$7.19

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