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Sagot :
Answer:
Zing Coffee Company
a. Differential Analysis:
Sell Regular Process Further Differential Effect
Columbian Into Decaf On Income
(Alternative 1) (Alternative 2) Alternative (2)
Revenues $58,500 $74,100 $15,600
Costs 39,000 49,230 10,230
Income (loss) $19,500 $24,870 $5,370
b. The Price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian is:
= $11.18 approx.
Explanation:
a) Data and Calculations:
Production batches = 6,500
Standard quantity of materials required in the process = 6,500 pounds
Cost of unit = $6
Total cost = $39,000
Selling price of regular Columbian coffee = $9 per pound
Revenue from regular Columbian coffee = $58,500
Selling price of Decaf Columbian coffee = $12 per pound
Additional processing costs = $10,230 per batch
Total cost after further processing = $49,230 ($39,000 + $10,230)
Loss during further processing = 5% of 6,500 = 325
Total quantity of Decaf Columbian coffee = 6,175
Total Sales revenue = $74,100 ($12 * 6,175)
Differential Analysis:
Sell Regular Process Further Differential Effect
Columbian Into Decaf On Income
(Alternative 1) (Alternative 2) Alternative (2)
Revenues $58,500 $74,100 $15,600
Costs 39,000 49,230 10,230
Income (loss) $19,500 $24,870 $5,370
Price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian is computed as follows:
Estimated revenue of the Decaf = $68,730 ($19,500 + $49,230)
Estimated selling price = $11.18 ($68,730/6,150)
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