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eBookLearning Objective 1 Problem-Solving StrategyProblem-Solving Strategy 4

Problem 24-4 (Algorithmic)
Differential Analysis for Further Processing

The management of Jamaican Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for \$2.17 per pound, and raw sugar can be sold without further processing for \$1.22 per pound. Raw sugar is produced in batches of 43,200 pounds by processing 108,000 pounds of sugar cane, which costs \$0.30 per pound of cane. Refined sugar will require additional processing costs of \$0.46 per pound of raw sugar, and 1.2 pounds of raw sugar will produce 1 pound of refined sugar.

Required:

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1. Prepare a differential analysis as of January 30, 2012, to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2). If required, do not round interim calculations.

 Differential Analysis
 Sell Raw Sugar (Alt. 1) or Process Further into Refined Sugar (Alt. 2)
 January 30, 2012
 Sell Raw Sugar (Alternative 1)
 Process Further into Refined Sugar (Alternative 2)
 Differential Effect on Income (Alternative 2)
 Revenues
 \$ Correct 8 of Item 1
 \$ Correct 9 of Item 1
 \$ Correct 10 of Item 1
 Costs
 Correct 12 of Item 1
 Correct 13 of Item 1
 Correct 14 of Item 1
 Income (Loss)
 \$ Correct 16 of Item 1
 \$ Correct 17 of Item 1
 \$ Correct 18 of Item 1