Question
ADP Mining Company mines an iron ore called Alpha. During the month of August, 412,000 tons of Alpha were mined and processed at a cost
ADP Mining Company mines an iron ore called Alpha. During the month of August, 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 as follows:
Delta | Super Delta | Pi | Precision Pi | |||||||||
Selling price | $ | 9 | /ton | $ | 15 | /ton | $ | 14 | /ton | $ | 24 | /ton |
Processing costs to refine Delta into Super Delta are $2,472,000; processing costs to refine Pi into Precision Pi are $494,400.
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.)
Incremental Profit (Loss)=
a-2. What would be the incremental profit or loss per unit if Pi is refined into Precision Pi?
Incremental Profit (Loss)=
c. What is the maximum profit that ADP Mining Company can expect to earn from the production of the 412,000 tons of Alpha?
Maximum Profit=
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