Reference no: EM132687540

Problem - Differential analysis for further processing - The management of Pittsburgh Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $1,800 per ton, and ingot can be sold without further processing for $1,000 per ton. Ingot is produced in batches of 72 tons by smelting 400 tons of bauxite, which costs $90 per ton of bauxite. Rolled aluminum will require additional processing costs of $525 per ton of ingot, and 1.2 tons of ingot will produce 1 ton of rolled aluminum (due to trim losses).

Instructions -

1. Prepare a differential analysis as of December 20, 2012, to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2).

2. Briefly report your recommendations.