Question: The management of International Aluminum Co is considering whether to

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 ingot can be sold without further processing for $ 1,100 per ton. Ingot is produced in batches of 80 tons by smelting 500 tons of bauxite, which costs $ 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).

1. Prepare a differential analysis as of February 5, 2014, to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2).
2. Briefly report your recommendations.

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  • CreatedJune 27, 2014
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