Mizzou Mining Company mines an iron ore called Alpha. During the month of December, 400,000 tons of Alpha were mined and processed at a cost of $742,500. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be sold as is or processed into the refined products Super Delta and Precision Pi. Selling prices for these products are:
|
Delta |
Super Delta |
Pi |
Precision Pi |
| Selling price |
$7/ton |
$15/ton |
$12/ton |
$24/ton |
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Processing costs to refine Delta into Super Delta are $2,400,000: processing costs to refine Pi into Precision Pi are $1,600,000.
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| (a) |
What would be the incremental profit or loss per unit if Delta is refined into Super Delta? (Input the amount as positive value. Omit the "$" sign in your response.)
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| (b) |
What would be the incremental profit or loss per unit if Pi is refined into Precision Pi? (Omit the "$" sign in your response.)
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| (a) |
Should Delta be sold as is or refined into Super Delta? |
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| (b) |
Should Pi be sold as is or refined into Precision Pi? |
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| Requirement 3: |
| Identify any costs in the problem that are not relevant to this decision. |
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| Requirement 4: |
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What is the maximum profit that Mizzou Mining Company can expect to earn from the production of the 400,000 tons of Alpha? (Omit the "$" sign in your response.)
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