Please help me to figure it out! Thanks! Sell or Process Further Abica Coffee Co
ID: 2410358 • Letter: P
Question
Please help me to figure it out! Thanks!
Sell or Process Further Abica Coffee Company produces Columbian coffee in batches of 5,200 pounds. The standard quantity of materials required in the process is 5,200 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $6.40 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 $11,150 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 Columblan Coffee Further Differential Differential revenue from further processing per batch: Revenue from sale of Decaf Columblan 54.912 Revenue from sale of Columbian coffee 33,280 Differential revenue 21.632 11,150 10,482 | Differental cost per batch: dditional cost of producing Decaf Columbian Differential income from further Decaf Columbian per batch Feedoack v Check My Work a. Follow Exhibit 10 in the text. For both products, subtract the costs from the revenues. Determine the differential effect on the revenues, costs, and income (loss) b. Should Ablca Coffee sell Columblan coffee or process further and sell Decaf Columblan? Yes, 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. 11 X per poundExplanation / Answer
Solution : let, price per pound be P
Neither advantage nor disadvantage means no profit no loss
No of units available for sale in Decaf columbian
= 5,200 - 4%loss = 5,200 -208 = 4,992 pound
Now, sale - cost = profit
4,992 x P - $11,150 = 0
4,992 P = $11,150
Price = $2.23