The management of Dominican Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $2.20 per pound, and raw sugar can be sold without further processing for $1.40 per pound. Raw sugar is produced in batches of 42,000 pounds by processing 100,000 pounds of sugar cane, which costs $0.35 per pound of cane. Refined sugar will require additional processing costs of $0.50 per pound of raw sugar, and 1.25 pounds of raw sugar will produce 1 pound of refined sugar.
Differential Analysis
Sell Raw Sugar (Alternative 1) or Process Further into Refined Sugar (Alternative 2)
March 24
| 1 |
|
Sell Raw Sugar |
Process Further into Refined Sugar |
Differential Effect on Income |
| 2 |
|
(Alternative 1) |
(Alternative 2) |
(Alternative 2) |
| 3 |
?Revenues, per batch
|
58800?
|
|
|
| 4 |
?Costs, per batch
|
-35000?
|
|
|
| 5 |
?Income (Loss), per batch
|
23800?
|