The management of Dorsch Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $4,100 per ton, and ingot can be sold without further processing for $2,400 per ton. Ingot is produced in batches of 80 tons by smelting 400 tons of bauxite, which costs $500 per ton. Rolled aluminum will require additional processing costs of $750 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum (due to trim losses).

Instructions

1. Prepare a report as of February 3, 2012, presenting a differential analysis associated with the further processing of aluminum ingot to produce rolled aluminum.

2. Briefly report your recommendations.