Question

Abica Coffee Company produces Columbian coffee in batches of 5,900 pounds. The standard quantity of materials required in the process is 5,900 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 $11.00 per pound. The processing into Decaf Columbian requires additional processing costs of $12,450 per batch. The additional processing will also cause a 4% loss of product due to evaporation.

a. Prepare a differential analysis report for the decision to sell or process further.

Abica Coffee Company
Proposal to Process Columbian Coffee Further
Differential Analysis Report
Differential revenue from further processing per batch:
________________________________	$
_______________________________ $ _______________________________ $
The options ( Additional cost of producing Decaf Columbian, Decaf Columbian per batch, Differential revenue, Revenue from sale of Columbian coffee)		$
Differential cost per batch:
________________________________ $
The options (Additional cost of producing Decaf Columbian, Decaf Columbian per batch, Differential revenue, Revenue from sale of Columbian coffee, Revenue from sale of Decaf Columbian) _______________________________ S The Options ( Differential income from further processing Decaf Columbian per batch, Differential loss from further processing Decaf Columbian per batch)

b. Should Abica Coffee 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 the nearest cent.
_________________$ per pound

please I want accurate answer that include the numbers above

Answer 1

Abica Coffee Company
Proposal to Process Columbian Coffee Further
Differential Analysis Report
Columbian Coffee without processing can be sold for $8.4 / pound So revenue = 5,900 x 4 = $49,560 Columbian coffee after processing can be sold for $11 / pound there will be loss of 4% of quantity so left will be 96% of 5900 = 5,664 pounds Revenue = 5,664 x 11 = $62,304 Differential Revenue = $62,304 - $49,560 = $12,744 Differential cost is to carry out the process costing $12,450 Net Revenue = $12,744 - $12,450 = $294 answer to part B. is that the Abica Coffee should process further and sell Decaf Columbian as it will earn it $294 more. Answer to part c. The difference part is $294 which the company is earning more, so the price has to fell by 294/5664 = $0.052 / pound to earn same revenue so that there is no advantage or disadvantage. new price will be $11 - $0.052 = $10.948 / pound