Mizzou Mining Company mines an iron ore called Alpha. During the month of Decemb
ID: 2376790 • Letter: M
Question
Mizzou Mining Company mines an iron ore called Alpha. During the month of December, 412,000 tons of Alpha were mined and processed at a cost of $748,500. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be sold as is or processed into the refined products Super Delta and Precision Pi. Selling prices for these products are:
Processing costs to refine Delta into Super Delta are $2,472,000: processing costs to refine Pi into Precision Pi are $494,400.
What would be the incremental profit or loss per unit if Delta is refined into Super Delta? (Input the amount as positive value. Omit the "$" sign in your response.)
What would be the incremental profit or loss per unit if Pi is refined into Precision Pi? (Omit the "$" sign in your response.)
What is the maximum profit that Mizzou Mining Company can expect to earn from the production of the 412,000 tons of Alpha? (Omit the "$" sign in your response.)
Mizzou Mining Company mines an iron ore called Alpha. During the month of December, 412,000 tons of Alpha were mined and processed at a cost of $748,500. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be sold as is or processed into the refined products Super Delta and Precision Pi. Selling prices for these products are:
Explanation / Answer
Delta = 60% of Alpha = 60%*400,000 = 240,000 Ton
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Pi = 40% of Alpha = 40%*400,000 = 160000 Ton
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Addl Refning cost for Super Delta = Refining cost/Delta Qty
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= $2400,000/240,000=$10 per ton
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Incremental Prfit per ton = Super delta price per ton - Delta price per ton
= 15-7 = 8 per ton.--------------------ANSWER
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addl Refining, we have 8-10 = -$2 per ton Loss
So Total Loss by refining to super delta= $2*240,000 = ($480,000) ......ANSWER
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Refning cost for Super Pi = Refining cost/Pi Qty
= $1600,000/160,000=$10 per ton--------------------ANSWER
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Incremental Prfit per ton = Super Piprice per ton - Pi price per ton
= 24-12 = 12 per ton
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So by addl Refining, we have 12-10 = $2 per ton Profit
So Total Profit by refining to super pi = $2*160,000 = $320,000--------.....ANSWER
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