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# Mizzou Mining Company E16-4 Sell or process furt

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E16-4 Sell or process further?

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
________________________________________

Processing costs to refine Delta into Super Delta are \$2,400,000: processing costs to refine Pi into Precision Pi are \$1,600,000.
Requirement 1:
(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.)

Incremental
\$

(b) What would be the incremental profit or loss per unit if Pi is refined into Precision Pi? (Omit the "\$" sign in your response.)

Incremental
\$

Requirement 2:
(a) Should Delta be sold as is or refined into Super Delta?

(b) Should Pi be sold as is or refined into Precision Pi?

Requirement 3:
Identify any costs in the problem that are not relevant to this decision.

Requirement 4:
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.)

Maximum profit \$