BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Sell or process further

Rise N’ Shine Coffee Company produces Columbian coffee in batches of 6,000 pounds. The standard quantity of materials required in the process is 6,000 pounds, which cost $5.50 per pound. Columbian coffee can be sold without further processing for $9.22 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.88 per pound. The processing into Decaf Columbian requires additional processing costs of $10,230 per batch. The additional processing also causes a 5% loss of product due to evaporation.

a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2).

b. Should Rise N’ Shine 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.

a)

To determine

Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business.

To Prepare: The differential analysis of Company RNSC on October 6, to decide whether to sell Regular Columbian or process it further to Decaf Columbian.

Explanation

The differential analysis of Company RNSC on October 6, for the given alternatives is shown below.

Differential Analysis of Company RNSC
Sell Regular Columbian (Alt. 1) or Process Further to Decaf Columbian (Alt. 2)
October 6
Sell Regular Columbian  (Alternative 1) Process Further to Decaf Columbian (Alternative 2) Differential Effect on income
Revenues (1)         $55,320 (2)           $67,716 $12,396
Costs (3)   (-)  $33,000 (4)     (-)  $43,230 (-)  $10,230
Income (loss) $22,320 $24,486 $2,166

 Table (1)

The differential analysis of Company RNSC shows that processing the Regular Columbian to Decaf Columbian shall yield a greater income of $2,166.

Working Note:

Calculate the revenues from selling Regular Columbian.

Revenue = $9.22 × 6,000 lb.= $55,320

(1)

Calculate the revenues from selling Decaf Columbian

b)

To determine

To Explain: On the basis of differential analysis, to decide whether to sell Regular Columbian or process it further to Decaf Columbian.

c)

To determine
The price at which Decaf Columbian would cause neither advantage nor disadvantage for processing it further and selling the Decaf Columbian.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

In what way is a college degree a form of capital?

Brief Principles of Macroeconomics (MindTap Course List)

In what ways is economics a science?

Principles of Microeconomics (MindTap Course List)

Explain the purpose of the work sheet.

College Accounting, Chapters 1-27

What are compensated absences? How does a company account for them?

Intermediate Accounting: Reporting And Analysis

Discuss target market strategies

MKTG 12:STUDENT ED.-TEXT

BASICS OF CAPITAL BUDGETING You recently went to work for Allied Components Company, a supplier of auto repair ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Identify three types of businesses according to activities.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

What is systems implementation?

Pkg Acc Infor Systems MS VISIO CD