Question
ADP Mining Company mines an iron ore called Alpha. During the month of August, 417,000 tons of Alpha were mined and processed at a cost
ADP Mining Company mines an iron ore called Alpha. During the month of August, 417,000 tons of Alpha were mined and processed at a cost of $751,000. 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 as follows:
Delta | Super Delta | Pi | Precision Pi | |||||||||
Selling price | $ | 19 | /ton | $ | 21 | /ton | $ | 19 | /ton | $ | 24 | /ton |
Required:
a-1. What would be the incremental profit or loss per unit if Delta is refined into Super Delta? (Loss amounts should be indicated with a minus sign.)
a-2. What would be the incremental profit or loss per unit if Pi is refined into Precision Pi?
a-3. Should Delta be sold as is or refined into Super Delta?
- Delta should be sold as is. | |
- Delta should be processed further and sold as Super Delta. |
a-4. Should Pi be sold as is or refined into Precision Pi?
- Pi should be processed further and sold as Precision Pi. | |||||||
- Pi should be sold as is. b. Identify any costs in the problem that are not relevant to this decision.
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