Differential Analysis for Further Processing The management of Dominican Sugar Company is considering whether to process...
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Differential Analysis for Further Processing The management of Dominican Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $2.22 per pound, and raw sugar can be sold without further processing for $1.24 per pound. Raw sugar is produced in batches of 40,800 pounds by processing 102,000 pounds of sugar cane, which costs $0.31 per pound of cane. Refined sugar will require additional processing costs of $0.47 per pound of raw sugar, and 1.20 pounds of raw sugar will produce 1 pound of refined sugar. Required: 1. Prepare a differential analysis as of March 24 to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2). If required, do not round interim calculations. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Raw Sugar (Alt. 1) or Process Further into Refined Sugar (Alt. 2) March 24 Sell Raw Process Further into (Alternative 1) Alternative 2) Sugar Refined Sugar (Alternative 2) Differential Effects Revenues, per batch 50,592 75,450 25,248 X Costs, per batch -31,620 V -50,796 -19,176 V Profit (loss), per batch 18,972 24,684 V -6,072 X Feedback Check My Work 1. For both products, subtract the costs from the revenues for a batch of sugar. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2 2. Dominican Sugar Company should not process raw sugar further to produce refined sugar, because profits would be increased Differential Analysis for Further Processing The management of Dominican Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $2.22 per pound, and raw sugar can be sold without further processing for $1.24 per pound. Raw sugar is produced in batches of 40,800 pounds by processing 102,000 pounds of sugar cane, which costs $0.31 per pound of cane. Refined sugar will require additional processing costs of $0.47 per pound of raw sugar, and 1.20 pounds of raw sugar will produce 1 pound of refined sugar. Required: 1. Prepare a differential analysis as of March 24 to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2). If required, do not round interim calculations. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Raw Sugar (Alt. 1) or Process Further into Refined Sugar (Alt. 2) March 24 Sell Raw Process Further into (Alternative 1) Alternative 2) Sugar Refined Sugar (Alternative 2) Differential Effects Revenues, per batch 50,592 75,450 25,248 X Costs, per batch -31,620 V -50,796 -19,176 V Profit (loss), per batch 18,972 24,684 V -6,072 X Feedback Check My Work 1. For both products, subtract the costs from the revenues for a batch of sugar. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2 2. Dominican Sugar Company should not process raw sugar further to produce refined sugar, because profits would be increased
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