Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Question
Chapter 25, Problem 25.4APR
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 DS as on March 24 to decide whether to sell Raw Sugar or process it further to Refined Sugar.
b)
To determine
To Report: The recommendations for Company DS.
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Differential Analysis for Further Processing
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.
Required:
1. Prepare a differential analysis as of March 24 to determine whether to sell raw sugar
(Alternative 1) or process further into refined sugar (Alternative 2).
Differential Analysis
Sell Raw Sugar (Alt. 1) or Process Further into Refined Sugar (Alt. 2)
March 24
Process
Sell Raw
Further into
Differential
Sugar
(Alternative 1)
Refined
Effects
Sugar
(Alternative 2)
(Alternative 2)
Revenues, per batch
Costs, per batch…
Differential Analysis for Further Processing
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.
Required:
Prepare a differential analysis as of March 24 to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2).
Differential Analysis
Sell Raw Sugar (Alt. 1) or Process Further into Refined Sugar (Alt. 2)
March 24
Sell RawSugar(Alternative 1)
ProcessFurther intoRefinedSugar(Alternative 2)
DifferentialEffects (Alternative 2)
Revenues, per batch…
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.
Required:
1. Prepare a differential analysis as of March 24 to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2).
Chapter 25 Solutions
Accounting
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