Differential Analysis for Further ProcessingThe management of Dominican Sugar Company is considering whether to processfurther raw sugar into refined sugar. Refined sugar can be sold for $2.20 per pound, andraw sugar can be sold without further processing for $1.40 per pound. Raw sugar isproduced in batches of 42,000 pounds by processing 100,000 pounds of sugar cane,which costs $0.35 per pound of cane. Refined sugar will require additional processingcosts of $0.50 per pound of raw sugar, and 1.25 pounds of raw sugar will produce 1pound of refined sugar.Required:1. Prepare a differential analysis as of March 24 to determine whether to sell raw sugar(Alternative 1) or process further into refined sugar (Alternative 2).Differential AnalysisSell Raw Sugar (Alt. 1) or Process Further into Refined Sugar (Alt. 2)March 24ProcessSell RawFurther intoDifferentialSugar(Alternative 1)RefinedEffectsSugar(Alternative 2)(Alternative 2)Revenues, per batchCosts, per batchProfit (loss), per batch2. Dominican Sugar Companynot process raw sugar further to producerefined sugar because profits would beby $5,880 per batch.

In differential analysis , we need to compute the difference in profitability of two given options

Answered: Differential Analysis for Further…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sell or Process Further Zing Coffee Company produces Columbian coffee in batches of 5,800 pounds. The standard quantity of materials required in the process is 5,800 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 $12,050 per batch. The additional processing will also cause a 5% 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: Revenue from sale of Decaf Columbian v Revenue from sale of Columbian coffee v Differential revenue v Differential cost per batch: Additional cost of producing Decaf Columbian v Differential…
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McPupper Steel has products that cost $10,500 to manufacture. The products can be sold as is for $13,000 or could be processed further for a cost of $2,100 and sold for $14,000. What would be the incremental profit or (loss) of processing the products further and selling them instead of selling them as is?
A bicycle manufacturer currently produces 237,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.20 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.60 per chain. The necessary machinery would cost $293,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require $44,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the 10 years. Expected proceeds from scrapping the machinery after 10 years are $21,975. If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the…
Sell or Process Further Abica Coffee Company produces Columbian coffee in batches of 6,500 pounds. The standard quantity of materials required in the process is 6,500 pounds, which cost $6 per pound. Columbian coffee can be sold without further processing for $9 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12 per pound. The processing into Decaf Columbian requires additional processing costs of $13,068 per batch. The additional processing also causes a 5% loss of product due to evaporation. a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2) October 6 SellRegularColumbian(Alternative 1) ProcessFurther…
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Sell or Process Further Abica Coffee Company produces Columbian coffee in batches of 6,200 pounds. The standard quantity of materials required in the process is 6,200 pounds, which cost $6 per pound. Columbian coffee can be sold without further processing for $9 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12 per pound. The processing into Decaf Columbian requires additional processing costs of $12,701 per batch. The additional processing also causes a 5% loss of product due to evaporation. a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2) October 6 SellRegularColumbian(Alternative 1) ProcessFurther…

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