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

Question

Sell or Process Further 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 $5.00 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 equi es additional processing costs of $10 250 per batch. The additional processing also cause a 5% loss of product due to evaporation. a. Prepare a differential analysis report for the decision to sell or process further. Proposal to Process Columbian Coffee Further Differential Analysis Report Differential revenue from further processing per batch Revenue from sale of Decaf Columbian Revenue from sale of Columbian coffee Differential revenue Differential cost per batch: Additional cost of producing Decaf Columbian V Differential income from further processing Decaf Columbian per batch

Explanation / Answer

a Differential revenue from further processing per batch: Revenue from sale of Decaf Columbian 57475 Revenue from sale of Columbian coffee 46200 Differential revenue 11275 Diffenential cost per batch: Additional cost of producing Decaf Columbian 10250 Differential income from further processing 1025 b Yes process further c Price of neither advantage/disadvantage=11-(1025/5225)= $10.80

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