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.

  • CreatedJune 27, 2014
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