Sell or Process Further Dakota Coffee Company produces Columbian coffee in batches of 7,500 pounds. The standard quantity of materials required in the process is 7,500 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $9.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.60 per pound. The processing into Decaf Columbian requires additional processing costs of $6,300 per batch. The additional processing will also cause a 5% loss of product due to evaporation. a. Prepare a differential analysis dated December 11 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). If required, use a minus sign to indicate a loss. Differential Analysis Sell Regular (Alt. 1) or Process Further into Decaf (Alt. 2) December 11 Process Further into Decaf (Alternative 1) (Alternative 2) (Alternative 2) Sell Differential Effects Regular Revenues Costs Profit (Loss) b. Should Dakota Coffee Company sell Columbian coffee or process further and sell Decaf Columbian? 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
Sell or Process Further Dakota Coffee Company produces Columbian coffee in batches of 7,500 pounds. The standard quantity of materials required in the process is 7,500 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $9.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.60 per pound. The processing into Decaf Columbian requires additional processing costs of $6,300 per batch. The additional processing will also cause a 5% loss of product due to evaporation. a. Prepare a differential analysis dated December 11 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). If required, use a minus sign to indicate a loss. Differential Analysis Sell Regular (Alt. 1) or Process Further into Decaf (Alt. 2) December 11 Process Further into Decaf (Alternative 1) (Alternative 2) (Alternative 2) Sell Differential Effects Regular Revenues Costs Profit (Loss) b. Should Dakota Coffee Company sell Columbian coffee or process further and sell Decaf Columbian? 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Sell or Process Further
Transcribed Image Text:Sell or Process Further
Dakota Coffee Company produces Columbian coffee in batches of 7,500 pounds. The standard
quantity of materials required in the process is 7,500 pounds, which cost $6.00 per pound.
Columbian coffee can be sold without further processing for $9.80 per pound. Columbian coffee
can also be processed further to yield Decaf Columbian, which can be sold for $11.60 per
pound. The processing into Decaf Columbian requires additional processing costs of $6,300 per
batch. The additional processing will also cause a 5% loss of product due to evaporation.
a. Prepare a differential analysis dated December 11 on whether to sell regular Columbian
(Alternative 1) or process further into Decaf Columbian (Alternative 2). If required, use a
minus sign to indicate a loss.
Differential Analysis
Sell Regular (Alt. 1) or Process Further into Decaf (Alt. 2)
December 11
Process
Further into
Decaf
(Alternative 1) (Alternative 2) (Alternative 2)
Sell
Differential
Effects
Regular
Revenues
Costs
Profit (Loss)
b. Should Dakota Coffee Company sell Columbian coffee or process further and sell Decaf
Columbian?
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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