Selling price of raw coal = $27/tonne

Cost of producing raw coal = $22/tonne

Profit on selling raw coal = $5/tonne

Annual raw coal output = 10000000

Selling price of processed coal = $36/tonne

Additional cost for processing;

Direct labour cost per annum = $800000

Supervisory personnel per annum = $200000

Rental equipment charges per annum = 25000*12

=$300000

Contract sizing and claning per annum = 3.5*10000000

=$35000000

Outbound rail fright per annum = 240*10000000/60

= 40000000

Total Additional cost per annum = 800000+200000+300000+35000000+40000000

=76300000

Additional cost per one tonne = Total additional cost / Annual output

= 76300000/10000000

=7.63/tonne

Total cost for selling processed coal = cost of raw coal + additional cost

=22+7.63

= $29.63/tonne

Percentage of material weight loss while processing= 6%

Wight of processed coal= 10000000*(100-4)%

=10000000*.96

=9600000 tonne

Total Profit on sale of raw coal = 10000000*5

= $50000000

Profit on sale of Processed coal = sale price- cost on processed coal

=36-29.63

= $6.37/tonne

Total profit on selling processed coal = 9600000*6.37

=$61152000

Additional Profit on selling processed coal = 61152000-50000000

=$11152000

It is better to sell processed coal

b) if cost of raw coal reduces profit will increase on selling processed coal by 8.37.

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