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 if not can be sold without further processing for $1,100 per ton. I got is produced in batches of 80 tons by smelting 500 tons of bauxite, which cost $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). Use a minus sign to indicate subtracted amounts, negative amounts, or a loss.
Differential analysis
Sell Ingot(Alt.1) or Process Futher into Rolled Aluminum (Alt.2)
February 5
Sell Ingot(Alternative1). Process Further into Rolled Aluminum (Alternitive 2). Differential Effect on Income
(Alternative 2)
Revenues, per ton. $. $. $
Cost,per ton. $. $. $
Income(loss),per ton. $. $. $
2. International aluminum company ____ process alumuingot Further , rather than sell aluminum ingot because profits would be ____ if ingot was processed further into rolled aluminum.
