Differential Analysis for Further Processing

The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,400 per ton, and ingot can be sold without further processing for $1,200 per ton. Ingot is produced in batches of 87 tons by smelting 500 tons of bauxite, which costs $104 per ton of bauxite. Rolled aluminum will require additional processing costs of $650 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum.

Required:

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1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2). If required, do not round interim calculations. If required, use a minus sign to indicate a loss.

Differential Analysis Sell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2) February 5

	Sell Ingot (Alternative 1)	Process Further into Rolled Aluminum (Alternative 2)	Differential Effects (Alternative 2)
Revenues, per batch	$fill in the blank bd9fa3ff2ff2f8a_1	$fill in the blank bd9fa3ff2ff2f8a_2	$fill in the blank bd9fa3ff2ff2f8a_3
Costs, per batch	fill in the blank bd9fa3ff2ff2f8a_4	fill in the blank bd9fa3ff2ff2f8a_5	fill in the blank bd9fa3ff2ff2f8a_6
Profit (loss), per batch	$fill in the blank bd9fa3ff2ff2f8a_7	$fill in the blank bd9fa3ff2ff2f8a_8	$fill in the blank bd9fa3ff2ff2f8a_9

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2. International Aluminum Co.

shouldshould notshould not

process aluminum ingot further, rather than sell aluminum ingot because profits would be

increasedreducedreduced

.