Principles of Accounting II

Chapters 22, 23 & 25

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 82 tons by smelting 550 tons of bauxite, which costs $105 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 I ton of rolled aluminum. Required: Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative I nus si n to indicate a Differential Analysis Sell Ingot (Alt. I) or Process Further into Rolled Aluminum (Alt. 2) February 5 process further into rolled aluminum (Altemative 2). If required, do not round interim calculations. If required, Sell Ingot (Alternative I) sc:z Revenues, per batch Costs, per batch Profit (loss), per batch Process Differential Further into Effe Cts Rolled (Alternative 2) Aluminum (Alternative 2) process aluminum ingot further, rather than sell aluminum ingot because profits would