Zing Roast Coffee Company produces Columbian coffee in batches of 6,100 pounds.
ID: 2477226 • Letter: Z
Question
Zing Roast Coffee Company produces Columbian coffee in batches of 6,100 pounds. The standard quantity of materials required in the process is 6,100 pounds, which cost $6.00 per pound. Columbian coffee can be sold without further processing for $9.40 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.00 per pound. The processing into Decaf Columbian requires additional processing costs of $9,450 per batch. The additional processing will also cause a 6% loss of product due to evaporation.
A. Prepare a differential analysis dated August 28, 2014, on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2).
B. Should Zing Roast sell Columbian coffee or process further and sell Decaf Columbian?
C. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian. Round your answer to two decimal places.
??? $ per pound
Sell Regular Columbian (Alternative 1 Process Further into Decaf Columbian (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs Income (Lost)Explanation / Answer
B.Zing roast sell columbia coffee and should not process further as further processing would incurred loss of $3,716.
C. In order to cover (3716) loss on production Decaf Columbian price in which product should be sold will be
= 11 + ($3,716/5,734 units) = 11+ .6480= $11.65
So Selling price will $11.65
A. Prepare a differential analysis dated August 28, 2014, on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). Particulars Sell Regular Columbian (Alternative 1) Process Further into Decaf Columbian (Alternative 2) Differential Effect on Income (Alternative 2) Sales $57,340(6100 units*$9.4) $63074(6,100 units*94%*$11) $5734 Less:Cost Variable cost $36,600(6100 Units*$6) $36,600(6,100Units*$6) - Additinal Proceesing cost cost - $9,450 $(9,450) Income(lost) $20,740 $17,024 $(3,716)Related Questions
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