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 7,000 pounds. The standard quantity of materials required in the process is 7,000 pounds, which cost $4.00 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 $10.00 per pound. The processing into Decaf Columbian requires additional processing costs of $9,650 per batch. The additional processing will also cause a 4% 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 Abica 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

Sell Regular Columbian (Alternative 1) Process Further into Decaf Columbian (Alternative 2) Differential Effect on Income (Alternative 2) Revenues 58800 67200 8400 Costs -28000 -37650 -9650 Income (Loss) 30800 29550 -1250 b Sell Columbian c Price of Decaf Columbian=10+(1250/6720)= 10.19

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