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Sell or Process Further Dakota Coffee Company produces Columbian coffee in batches of 7,500 pounds. The standard quantity of materials required in the process
Sell or Process Further Dakota Coffee Company produces Columbian coffee in batches of 7,500 pounds. The standard quantity of materials required in the process is 7,500 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $9.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.60 per pound. The processing into Decaf Columbian requires additional processing costs of $6,300 per batch. The additional processing will also cause a 5% loss of product due to evaporation. a. Prepare a differential analysis dated December 11 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). If required, use a minus sign to indicate a loss. Differential Analysis Sell Regular (Alt. 1) or Process Further into Decaf (Alt. 2) December 11 Line Item Description, Sell Regular (Alternative 1) Process Further into Decaf (Alternative 2) Differential Effects (Alternative 2) Revenues Costs Profit (Loss) Feedback Check My Work a. For both products, subtract the costs from the revenue per batch. Determine the differential effect on income of the revenues, costs, and profit (loss) by subtracting alternative 1 from alternative 2.
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