The management of Dominican Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $2.20 per pound, and raw sugar can be sold without further processing for $1.40 per pound. Raw sugar is produced in batches of 42,000 pounds by processing 100,000 pounds of sugar cane, which costs $0.35 per pound of cane. Refined sugar will require additional processing costs of $0.50 per pound of raw sugar, and 1.25 pounds of raw sugar will produce 1 pound of refined sugar.

Differential Analysis

Sell Raw Sugar (Alternative 1) or Process Further into Refined Sugar (Alternative 2)

March 24

1		Sell Raw Sugar	Process Further into Refined Sugar	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3	Revenues, per batch	58800
4	Costs, per batch	-35000
5	Income (Loss), per batch	23800