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In: Accounting

Sell or Process Further Zing Coffee Company produces Columbian coffee in batches of 5,800 pounds. The...

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 $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 $12,542 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
Sell
Regular
Columbian
(Alternative 1)		 Process
Further into
Decaf
Columbian
(Alternative 2)		 Differential
Effect
on Income
(Alternative 2)
Revenues $ $ $
Costs
Income (Loss) $ $ $

b. Should Zing 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

Solutions

Expert Solution

Answer is as below:

ekkarill92 answered 1 year ago
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