1 Meat Skins Rattles Total

Sales 33,000.00 8,800.00 2,200.00 44,000.00

Share of snake cost (19,800.00) (5,280.00) (1,320.00) (26,400.00)
Processing expenses (6,600.00) (990.00) (660.00) (8,250.00)
Allocated overhead (4,400.00) (660.00) (440.00) (5,500.00)
Income (loss) 2,200.00 1,870.00 (220.00) 3,850.00

Cost of snakes 60% 60% 60%

Allocated overhead 67% 67% 67%

If Jack drops rattles: Total

Sales 41,800.00
Share of snake cost (26,400.00)
Processing expenses (7,590.00)
Allocated overhead (5,500.00)
Income (loss) 2,310.00
Decrease in income 1,540.00

No, Jack Bibby chould not drop rattles from his product offerings because it will decrease
the income by $1,540.

2
Total snake costs 26,400.00
Price per snake 11.00
Total number of snakes 2,400.00

Rattles Per Unit

Sales 0.92
Processing cost (0.28)
Profit 0.64

No, Jack Bibby should not sell the rattles to the miner because processed rattles will give
higher profit.
1
Output Price Sales
Raw coal 9,000,000.00 30.00 270,000,000.00
Sizing/cleaning 8,460,000.00 34.00 287,640,000.00
Incremental Sales 17,640,000.00
Incremental Costs:
Direct labor (790,000.00)
Supervisory personnel (190,000.00)
Rental, operating, maintenance (420,000.00)
Contract sizing and cleaning 3.30 (29,700,000.00)
Outbound rail freight 250.00 (35,250,000.00)
Incremental loss (48,710,000.00)

It is not profitable for NMC to process further the raw coal.

2
If the cost of producing raw coal will decrease it will not affect the analysis since it
is not relevant to know the incremental loss or income of further processing.

Coal fine
3 Raw coal 9,000,000
Material weight loss 6.00%
Salvage value 75.00%
Total output 405,000.00

Range:
Selling price 14.00 25.00
Costs (5.00) (3.00)
Incremental income/ton 9.00 22.00
Incremental income 3,645,000.00 8,910,000.00

Output Price Sales

Raw coal 9,000,000.00 30.00 270,000,000.00
Sizing/cleaning 8,460,000.00 34.00 287,640,000.00
Incremental Sales 17,640,000.00
Incremental Costs:
Direct labor (790,000.00)
Supervisory personnel (190,000.00)
Rental, operating, maintenance (420,000.00)
Contract sizing and cleaning 3.30 (29,700,000.00)
Outbound rail freight 250.00 (35,250,000.00)
Incremental loss of further processing (48,710,000.00)
Add: Maximum incremental income of coal fines 8,910,000.00
Total Incremental loss of further processing (39,800,000.00)
It will decrease the incremental loss of further processing by $3,645000 up to
$8,910,000.