My 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, were 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be sold as it or processed into the refined products Super Delta and Precision Pi. Selling prices for these products are:
- Delta = $7/ton
- Super Delta = $15/ton
- Pi = $12/ton
- Precision Pi = $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.Should Delta and Pi be sold as it or refined into Super Delta and Precision Pi? Why did you choose your answer?