Data table

$\backslash$table$[[,$A$,$B$,$C$],[1,$Selling price of raw coal,$$25$ per ton,$],[2,$Cost of producing raw coal,$$18$ per ton,$],[3,$Selling price of sized and cleaned coal,$$35$ per ton,$],[4,$Annual raw coal output,$10,800,000$ tons,$],[5,$Percentage of material weight loss in sizing$/$cleaning coal,$8\%,],[6,,\backslash$table$[[$Incremental Costs of Sizing$],[$& Cleaning Processes$]]],[7,$Direct labor,$$780,000$ per year$],[8,$Supervisory personnel,$$205,000$ per year$],[9,$Heavy equipment: rental, operating, maintenance costs,$$35,000$ per month$],[10,$Contract sizing and cleaning,$$3\mathrm{.}30$ per ton of raw coal$],[11,$Outbound rail freight,$$250$ per $600-$ton rail car$],[12,\backslash$table$[[$Percentage of sizing$/$cleaning waste that can be salvaged for coal$],[$fines$]],75\%,],[13,$Range of costs per ton for preparing coal fine for sale,$$1,$$$],[|14|,$Range of coal fine selling prices $($per ton$),$$$16,$$$]]$

;$3$

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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 ranges from $$16$ to $$26$ per ton, and costs of preparing coal fines for sale range from $$1$ to $$4$ per ton.

Requirements

Prepare an analysis to show whether it is more profitable for NMC to continue selling raw bulk coal or to process it further through sizing and cleaning. $($Ignore coal fines in your analysis.$)$

How would your analysis be affected if the cost of producing raw coal could be held down to $$16$ per ton?

Now consider the potential value of the coal fines and prepare an addendum that shows how their value affects the results of your analysis prepared in requirement $1.$ 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 $$16$ per ton?

The cost of producing the raw coal is

to the decision to process further or not. This

affect the analysis determined in requirement $1.$

Requirement $3.$ Now consider the potential value of the coal fines and prepare an addendum that shows how their value affects the results of your analysis prepared in requirement $1.$

Begin by calculating the incremental income at both the minimum and maximum income levels.

Analysis indicates that relative to selling bulk raw coal, the effect of further processing and selling coal fines is

$.$ NMC would

benefit from further processing and selling the coal finesNewcastle Mining Company $($NMC$)$ mines coal, puts it through a one$-$step crushing process, and loads the bulk raw coal onto river barges for shipment to customers. NMC$\text{'}$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 NMC to continue selling 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