ezto.m ADP Mining Company mines an iron ore called Alpha. During the month of Au
ID: 2587549 • Letter: E
Question
ezto.m ADP Mining Company mines an iron ore called Alpha. During the month of August, 414,000 tons of Alpha were mined and processed at a st of $749,500 As the Alpha ore lS mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi Each product can be sold as is or processed into the refined products Super Delta and Precision Pl. Selling prices for these products are as follows $13 ton $16 Morn Procsinp costs tone Deta into Super Delita are $2.235,600 processing costs to refñne Pl into Precision Pi are $993,600. Required a-1. What would be the incremental proft or loss per unit if Delfa is refined into Super Delta? (Loss amounts should be Indicated with a minus sign.) a-2. What would be the incremental profit or loss per unit if Pi is refined into Precision Pi? a-3. should Delita be sold as is or refined into Super Delta? Delta should be sold as is Delta should be processed further and sold as Super Delta a-4. Should Pi be sold as is or refined into Precision Pi? be processed further and sold as Precision P Pi should be sold as is b. Identify any costs in the problem that are not relevant to this decision . Tha S749 500 cost incurred to produce the Alpha ore is nottelevant Processing costs to rofine Delta into Super Delta are not relevant Processing costs to refine Pi into Precision Pi are $993,600 not relevant c. What is the maximum profit that ADP Mining Company can 414 000 tons of Alpha? expect to earm trom the production of the e o eExplanation / Answer
Total Alpha ore =414000 tons Delta =414000*60% =248400 tons PI =414000 *40% =165600 tons (a) What would be the Incremental profit profit or loss per unit if delta is refined into Super Delta? Amount Incremental price per unit if processed ($17-$13) $4 Incremenatl cost per unit if processed $2,235600/248400 $9 Incremental Loss per Unit of delta if further processed ($5) (a-2) What would be the Incremental profit profit or loss per unit if PI is refined into precision PI Amount Incremental price per unit if processed ($24-$16) $8 Incremenatl cost per unit if processed $993600/ 165600 $6 Incremental Profit per Unit of PI if further processed $2 (a - 3) Should delta be sold as is or refined into Super delta ? Answer is : Delta Should be sold as is because is generating incremental loss if Delta is further processed into precision PI (Incremenatl loss per Unit is $5) (a - 4) Should PI be sold as is or refined into Precision PI ? Answer is : PI shpuld be processed further asnd sold as precision PI because it generates incremental Profit, if PI is processed into Precision PI (Incremenatl Profit per unit $2) (b) Identify any costs in the problem that are not relevant to this decision Answer : This $749500 Cost incurred to produce Alpha ore is not relevant because , the cost of $749500 is incurrend to produce Ore to be used for delta and PI , but this problem is refers to making decision after production of Delta and PI (For further processing) © What is the maximum profit that ADP mining Company can expect to earn from the production of 414000 tons of Alpha Amount in $ Sales value of delta $13*248400 3229200 Sale value of precision PI $24*165600 3974400 Total revenue 7203600 less: production cost of Alpa ore 749500 less: Further processing cost of PI 993600 maximum profit 5460500
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