Sell or Process Further

Abica 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 $5.00 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 $12.00 per pound. The processing into Decaf Columbian requires additional processing costs of $14,550 per batch. The additional processing will also cause a 4% loss of product due to evaporation.

Question Content Area

Differential revenue from further processing per batch:

Revenue from sale of Decaf Columbian: $69,120

Revenue from sale of Columbian Coffee: $44,400

Differential Revenue: $24,720

Differential cost per batch:

Additional cost of producing Decaf Columbian: $14,550

Differential income form further processing Decaf Columbian per batch: $10,170

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.