Sell or Process Furthe Zing Coffee Company produces Columbian coffee in batches

Question

Sell or Process Furthe Zing Coffee Company produces Columbian coffee in batches of 5,500 pounds. The standard quantity of materials required in the process is 5,500 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $8.40 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.00 per pound. The processing into Decaf Columbian requires additional processing costs of $14,250 per batch. The additional processing will also cause a 6% loss of product due to evaporation. a. Prepare a differential analysis report for the decision to sell or process further. Zing Coffee Company Proposal to Process Columbian Coffee Further Differential Analysis Report Differential revenue from further processing per batch: $6870 46,200 Revenue from sale of Decaf Columbian Revenue from sale of Columbian coffee Differential revenue Differential cost per batch: Additional cost of producing Decaf Columblan 14,250 Differential loss from further processing Decaf Columbian per batch 3,580

Explanation / Answer

c Quantity of Decaf Columbian = 5500*(1-0.06)= 5170 Price of Decaf Columbian = 11+(3580/5170)= $11.69 per pound

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