Buffalo Mining Company (BMC) mines coal, puts it through a one-stop crushing process, and loads the bulk raw cont onto river barges for shipment to customers, BMC's management is currently evaluating the possibility of further processing the raw coal by sizing and cleaning it and selling it to an expanded set of customers at higher prices. The option of building a new sizing and cleaning plant is ruled out as being financially infeasible. Instead, Amy Kimbell, a mining engineer, is asked to explore outside-contracting arrangements for the cleaning and sizing process, Kimbell puts together the following summary: Click the icon to view the summary:) (Click the icon to view additional information.) Read the requirements Requirement 1. Prepare an analysis to show whether it is more profitable for BMC to continue seling raw bulk coal or to process it further through sizing and cleaning. (Ignore coal fines in your analysis.) Begin by calculating the incremental sales revenue, then incremental costs and finally incremental gain or loss. (Do not round until the final answer for each cost calculation, then round to the nearest dollar. Use parentheses or a minus sign for losses.) Incremental sales revenues: Sales revenue after further processing Sales revenue from bulk raw coal Incremental sales revenue Incremental costs: Direct labor Supervisory personnel Heavy equipment costs Sizing and cleaning Outbound rail freight Incremental costs Incremental gain(loss) The analysis indicates that it would be more profitable to Requirement 2. How would your analysis be affected if the cost of producing raw coal could be held down to $18 per ton? Than ht TUL mer it is more profitable for then incremental costs and sort B C 1 Selling price of raw coal $31 porton 2 Cost of producing raw coal $20 per ton 3 Selling price of sized and cleaned con 536 perton 4 Annual raw coal output 10,500,000 tons 5 Percentage of material weight loss in sizing cleaning coal 10% Incremental Costs of Sizing & 8 Cleaning Processes 7 Oirect labor 5810,000 per year 8 Supervisory personnel $215.000 per year 9. Heavy equipment: rental, operating, maintenance costs $30,000 per month 10 Contract sizing and cleaning $3.60 por ton of raw coal 11 Outbound rail freight $270 per 600 ton railcar 12 Percentage of sizing/cleaning waste that can be salvaged for coalfines 75% 13 Range of conts per ton for proparing coal fine for solo $3 $ 4 $16 S 24 14 Range of coal fine selling prices (perton) to if the cost of producing e decision to process for he coal fines and prepare More info SIE se Kimbell also learns that 75% of the material waste that occurs in the cleaning and sizing process can be salvaged as coal fines, which can be sold to steel manufacturers for their furnaces. The sale of coal fines is erratic. The selling price of coal fines Anges from $16 to $24 per ton, and costs of preparing coal fines for sale range from $3 to $4 per ton. bal ar Print Done