ifferential Analysis for Further Processing The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,200 per ton, and ingot can be sold without further processing for $1,100 per ton. Ingot is produced in batches of 80 tons by smelting 500 tons of bauxite, which costs $105 per ton of bauxite. Rolled aluminum will require additional processing costs of $620 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum (due to trim losses). Required: 1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2). Differential Analysis Sell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2) February 5 Sell Ingot (Alternative 1) Process Further into Rolled Aluminum (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per batch $fill in the blank d5dfe801c030058_1 $fill in the blank d5dfe801c030058_2 $fill in the blank d5dfe801c030058_3 Costs, per batch fill in the blank d5dfe801c030058_4 fill in the blank d5dfe801c030058_5 fill in the blank d5dfe801c030058_6 Income (Loss), per batch $fill in the blank d5dfe801c030058_7 $fill in the blank d5dfe801c030058_8 $fill in the blank d5dfe801c030058_9 2. International Aluminum Co. process aluminum ingot further, rather than sell aluminum ingot because profits would be if ingot was processed further into rolled aluminum.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4PB

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Differential Analysis for Further Processing

The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,200 per ton, and ingot can be sold without further processing for $1,100 per ton. Ingot is produced in batches of 80 tons by smelting 500 tons of bauxite, which costs $105 per ton of bauxite. Rolled aluminum will require additional processing costs of $620 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum (due to trim losses).

Required:

1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2).

Differential Analysis
Sell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2)
February 5
	Sell Ingot (Alternative 1)	Process Further into Rolled Aluminum (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per batch	$fill in the blank d5dfe801c030058_1	$fill in the blank d5dfe801c030058_2	$fill in the blank d5dfe801c030058_3
Costs, per batch	fill in the blank d5dfe801c030058_4	fill in the blank d5dfe801c030058_5	fill in the blank d5dfe801c030058_6
Income (Loss), per batch	$fill in the blank d5dfe801c030058_7	$fill in the blank d5dfe801c030058_8	$fill in the blank d5dfe801c030058_9

2. International Aluminum Co. process aluminum ingot further, rather than sell aluminum ingot because profits would be if ingot was processed further into rolled aluminum.

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