Sell or Process Further

Abica Coffee Company produces Columbian coffee in batches of 5,900 pounds. The standard quantity of materials required in the process is 5,900 pounds, which cost $5.00 per pound. Columbian coffee can be sold without further processing for $7.40 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $10.00 per pound. The processing into Decaf Columbian requires additional processing costs of $10,750 per batch. The additional processing will also cause a 5% loss of product due to evaporation.

a. Prepare a differential analysis report for the decision to sell or process further.

Abica Coffee Company
Proposal to Process Columbian Coffee Further
Differential Analysis Report
Differential revenue from further processing per batch:
Revenue from sale of Decaf Columbian	$
Revenue from sale of Columbian coffee
Differential revenue		$
Differential cost per batch:
(Additional cost of producing Decaf Columbian, Decaf Columbian per batch, Differential revenue, Revenue from sale of Columbian coffee, Revenue from sale of Decaf Columbian)
Differential income from further processing Decaf Columbian per batch		$

c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian. Round your answer to the nearest cent. $ per pound