Question - ADP Mining Company mines an iron ore called Alpha. During the month of August, 414,000 tons of Alpha were mined and processed at a cost of $749,500. 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:
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Delta
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Super Delta
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Pi
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Precision Pi
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Selling price
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$13/ton
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$17/ton
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$16/ton
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$24/ton
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Processing costs to refine Delta into Super Delta are $2,235,600; processing costs to refine Pi into Precision Pi are $993,600.
Required:
1. What would be the incremental profit or loss per unit if Delta is refined into Super Delta?
2. What would be the incremental profit or loss per unit if Pi is refined into Precision Pi?
3. What is the maximum profit that ADP Mining Company can expect to earn from the production of the 414,000 tons of Alpha?