The management of Caribbean Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $1.90 per pound, and raw sugar can be sold without further processing for $1.10 per pound. Raw sugar is produced in batches of 27,000 pounds by processing 90,000 pounds of sugar cane, which costs $0.25 per pound. Refined sugar will require additional processing costs of $0.35 per pound of raw sugar, and 1.2 pounds of raw sugar will produce 1 pound of refined sugar.
Instructions
1. Prepare a report as of January 30, 2010, presenting a differential analysis of the further processing of raw sugar to produce refined sugar.
2. Briefly report your recommendations.