Zing Coffee Company produces Columbian coffee in batches of 5,500 pounds. The standard quantity of materials required in the process is 5,500 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $6.40 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 $11,150 per batch. The additional processing will also cause a 4% loss of product due to evaporation.

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

Zing 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 35,200

Differential revenue $

Differential cost per batch: Additional cost of producing Decaf Columbian

Differential income from further processing Decaf Columbian per batch