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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
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 $2,300 per ton, and ingot can be sold without further processing for $1,150 per ton. Ingot is produced in batches of 86 tons by smelting 550 tons of bauxite, which costs $101 per ton of bauxite. Rolled aluminum will require additional processing costs of $600 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum Required: 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 Process Sell Ingot Differential Further into Effects (Alternative 1) Rolled Aluminum (Alternative 2) (Alternative 2) Revenues, per batch 9.900 184.000 X A5, 100X Costs, per batch 55,550 107,150 51400 Profit (los), per batch 76,50 X 33.560 2. International Aluminum Co should process aluminum ingot further, rather than sell aluminum Ingot because profits would be increased
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