EX 10-12 Sell or Process Further

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EXCEL TEMPLATE EX 10-12 Sell or process further Obj. 1 Rise N' Shine Coffee Company produces Columbian coffee in batches of 6,000 pounds. The standard quantity of materials required in the process is 6,000 pounds, which cost $5.50 per pound. Columbian coffee can be sold without further processing for $9.22 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.88 per pound. The processing into Decaf Columbian requires additional processing costs of $10,230 per batch. The additional processing will also cause a 5% loss of product due to evaporation. A. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). B. Should Rise N' Shine sell Columbian coffee or process further and sell Decaf Columbian? Explain. C. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian. A. Differential Analysis Sell Regular (Alt. 1) or Process Further into Decaf (Alt. 2) October 6 Process Futher Differential Effect Sell Regular Into Decat Alternative 1 Alternative 2 Alternative 2 Revenues Costs Income (loss) on Income B. The differential revenue from processing further to Decaf Columbian is the differential cost of processing further. Thus, Rise N' Shine Coffee process further into Decaf Columbian. C. The decrease in selling price of Decaf Columbian that would cause neither an advantage disadvantge for processing further: Net Advantage of Further Processing Volume of Decaf Columbian II The current selling price less the decrease would be: Verify by completing the following differential analysis based on the new selling price: Sell Regular Alternative 1 Process Futher Into Decaf Alternative 2 Differential Effect on Income Alternative 2 Revenues Costs Income (loss)