ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
EX 25-11 Seattle Roast Coffee Company produces Columbian coffee in batches of 8,000 pounds. The standard quantity of materials required in the process is 8,000 pounds,which cost $5.00 per pound. Columbian coffee can be sold without further processing for $10.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12.50per pound. The processing into Decaf Columbian requires additional processing costs of $10,500 per batch. The additional processing will also cause a 5% loss of product due to evaporation.
a. Prepare a differential analysis report for the decision to sell or process further.
b. Should Seattle Roast sell Columbian coffee or process further and sell Decaf Columbian?
c. Determine the price of Decaf Columbian that would cause neither an advantage or disadvantage for processing further and selling Decaf Columbian.
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