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 $$2,200$ per ton, and ingot can be sold without further processing for $$1,100$ per ton. Ingot is produced in batches of $80$ tons by smelting $500$ tons of bauxite, which costs $$105$ per ton of bauxite. Rolled aluminum will require additional processing costs of $$620$ per ton of ingot, and $1\mathrm{.}25$ tons of ingot will produce $1$ ton of rolled aluminum $($due to trim losses$).$

Required:

Prepare a differential analysis as of February $5$ to determine whether to sell aluminum ingot $($Alternative $1)$ or process further into rolled aluminum $($Alternative $2).$

Differential Analysis

Sell Ingot $($Alt$.1)$ or Process Further into Rolled Aluminum $($Alt$.2)$

Fetituary $5$

$\backslash$table$[[$Line Item Description

$\backslash$table$[[$Sell Ingot$],[($Alternative $1)]]$

$\backslash$table$[[$Process Further$],[$into Rolled Aluminum$],[($Alternative $2)]],\backslash$table$[[$Differential Effects$],[$Revenues$,$ per batch$]],],[$Costs$,$ per batch,,$],[$Profit $($loss$),$ per batch,,$]]$

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For both products, subtract the costs from the revenues. Determine the differential effect on income of the revenues, costs, and income $($loss$).$

International Aluminum $C.$ Should process aluminum ingot further, rather than sell aluminum ingot because profits would be increased if ingot was processed further