Sell or Process Further Abica Coffee Company produces Columbian coffee in batches of 6,300 pounds. The standard quantity of materials required in the process is 6,300 pounds, which $5 per pound. Columbian coffee can be sold without further processing for $9 per pound. Columbian coffee can also be processed further to yield Decaf Columbia which can be sold for $12 per pound. The processing into Decaf Columbian requires additional processing costs of $12,906 per batch. The additional processing a causes a 5% loss of product due to evaporation.
Sell or Process Further Abica Coffee Company produces Columbian coffee in batches of 6,300 pounds. The standard quantity of materials required in the process is 6,300 pounds, which $5 per pound. Columbian coffee can be sold without further processing for $9 per pound. Columbian coffee can also be processed further to yield Decaf Columbia which can be sold for $12 per pound. The processing into Decaf Columbian requires additional processing costs of $12,906 per batch. The additional processing a causes a 5% loss of product due to evaporation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Sell or Process Further
Abica Coffee Company produces Columbian coffee in batches of 6,300 pounds. The standard quantity of materials required in the process is 6,300 pounds, which cost
$5 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 $12,906 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
Revenues
Costs
Income (Loss)
Foodback
Sell
Regular
Columbian
(Alternative 1)
56,700
Process
Further into
Decaf
Columbian
(Alternative 2)
Differential
Effect
on Income
(Alternative 2)
Check My Wor
a For both products, subtract the costs from the revenues per batch. Determine the differential effect on income of the revenues, costs and income (oss) by subtracting aftemative
from alternative 2
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