North West Coal Mining Company (NWCMC) mines coal, puts it through a one-step crushing process, and loads the bulk raw coal onto river barges for shipment to customers. NWCMC's management is currently evaluating the possibility of further processing the raw coal by sizing and cleaning it and selling it to an expanded set of customers at higher prices. The option of building a new sizing and cleaning plant is ruled out as being financially infeasible. Instead, John Snow, a mining engineer, is asked to explore outside contracting arrangements for the cleaning and sizing process. John puts together the following summary: Selling price of raw coal $27 per tonne Cost of producing raw coal $22 per tonne Selling price of sized and cleaned coal $36 per tonne Annual raw coal output 10,000,000 tonnes Percentage of material weight loss in sizing/cleaning coal 6% Direct labour Supervisory personnel Heavy equipment: rental, operating, maintenance costs Contract sizing and cleaning Outbound rail freight Incremental Costs of Sizing and Cleaning Processes $800,000 per year 200,000 per year 25,000 per month 3.50 per tonne of raw coal 240 per 60-tonne rail car John also learns that 75% of the material loss that occurs in the cleaning and sizing process can be salvaged as coal fines, which can be sold to steel manufacturers for their furnaces. The sale of coal fines is erratic and NWCMC may need to stockpile it in a protected area for up to one year. The selling price of coal fines ranges from $15 to $24 per tonne and costs of preparing coalfines for sale range from $2 to $4 per tonne. Required 3. Prepare an analysis to show whether it is more profitable for NWCMC to continue selling raw bulk coal or to process it further through sizing and cleaning. (Ignore coalfines in your analysis.) (24 marks) How would your analysis be affected if the cost of producing raw.coal could be held down to $20 per tonne (6 marks) b