The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,300 per ton, and ingot can be sold without further processing for $1,150 per ton. Ingot is produced in batches of 84 tons by smelting 510 tons of bauxite, which costs $101 per ton of bauxite. Rolled aluminum will require additional processing costs of $620 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum. Required: 1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2). If required, do not round interim calculations. If required, use a minus sign to indicate a loss. Differential Analysis Sell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2) February 5 Line Item Description Sell Ingot (Alternative 1) Process Further into Rolled Aluminum (Alternative 2) Differential Effects (Alternative 2) Revenues, per batch Costs, per batch Profit (loss), per batch Feedback ▼ Check My Work 1. For both products, subtract the costs from the revenues. Determine the differential effect on income of the revenues, costs, and income (loss).
The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,300 per ton, and ingot can be sold without further processing for $1,150 per ton. Ingot is produced in batches of 84 tons by smelting 510 tons of bauxite, which costs $101 per ton of bauxite. Rolled aluminum will require additional processing costs of $620 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum. Required: 1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2). If required, do not round interim calculations. If required, use a minus sign to indicate a loss. Differential Analysis Sell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2) February 5 Line Item Description Sell Ingot (Alternative 1) Process Further into Rolled Aluminum (Alternative 2) Differential Effects (Alternative 2) Revenues, per batch Costs, per batch Profit (loss), per batch Feedback ▼ Check My Work 1. For both products, subtract the costs from the revenues. Determine the differential effect on income of the revenues, costs, and income (loss).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,300 per ton, and ingot can be sold without further processing for $1,150 per
ton. Ingot is produced in batches of 84 tons by smelting 510 tons of bauxite, which costs $101 per ton of bauxite. Rolled aluminum will require additional processing costs of $620 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of
rolled aluminum.
Required:
1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2). If required, do not round interim calculations. If required, use a minus
sign to indicate a loss.
Differential Analysis
Sell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2)
February 5
Line Item Description
Sell Ingot
(Alternative 1)
Process Further
into Rolled Aluminum
(Alternative 2)
Differential Effects
(Alternative 2)
Revenues, per batch
Costs, per batch
Profit (loss), per batch
Feedback
▼ Check My Work
1. For both products, subtract the costs from the revenues. Determine the differential effect on income of the revenues, costs, and income (loss).
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