Data table

Buffalo Mining Company $($BMC$)$ mines coal, puts it through a one$-$step crushing process, and loads the bulk raw $c$

processing the raw coal by sizing and cleaning it and selling it to an expanded set of customers at higher prices. $T$

mining engineer, is asked to explore outside$-$contracting arrangements for the cleaning and sizing process. Kimbe

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Kimbell also learns that $75\%$ of the material waste that occurs in the cleaning and

sizing process can be salvaged as coal fines, which can be sold to steel

manufacturers for their furnaces. The sale of coal fines is erratic. The selling price

of coal fines ranges from $$17$ to $$24$ per ton, and costs of preparing coal fines for

sale range from $$3$ to $$5$ per ton.

$11$

Requirement $1.$ Prepare an analysis to show whether it is more profitable for $BMC$ to continue selling raw bulk co

Begin by calculating the incremental sales revenue, then incremental costs and finally incremental gain or loss. $($D

sign for losses.$)$

Incremental sales revenues:

Sales revenue after further processing

Sales revenue from bulk raw coal

Incremental sales revenue

Requirements

Prepare an analysis to show whether it is more profitable for $BMC$ to continue selling raw bulk

coal or to process it further through sizing and cleaning. $($Ignore coal fines in your analysis.$)$

How would your analysis be affected if the cost of producing raw coal could be held down to

$$16$ per ton?

Now consider the potential value of the coal fines and prepare an addendum that shows how

their value affects the results of your analysis prepared in requirement $1.$