Miramichi Industrial Products Co. is a diversified industrial-cleaner processing company. The company's main plant produces two products: a table cleaner and a floor cleaner. They are made from a common set of chemical inputs (called CDG). Each week, the company processes 27,000 litres of chemical input at a cost of $210,000 into 18,000 litres of floor cleaner and 9,000 litres of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name FloorShine. The additional processing costs for this conversion total $250,000.
FloorShine sells at $20 per one-litre bottle. The table cleaner can be sold for $25 per one-litre bottle. However, the table cleaner can be converted into two other products by adding 9,000 litres of another compound (TCP) to the 9,000 litres of table cleaner. This joint process will yield 9,000 litres each of table stain remover and table polish. The additional processing costs for this process are $120,000. Both table products can be sold for $20 per one-litre bottle.
The company decided not to process the table cleaner into table stain remover and table polish based on the following analysis:

aIf the table cleaner is not processed further, it is allocated one third of the physical output.
bIf the table cleaner is processed further, the total physical output is 36,000 account for 50% of the total physical output and are each allocated 25% of
Instructions
$210,000 of CDG cost, which is equal to one third of the total litres. Table stain remover and table polish combined the CDG cost.
(a) Do the following to determine whether management made the correct decision by not processing the table cleaner further.
1. Calculate the company's total weekly gross profit assuming the table cleaner is not processed further.
2. Calculate the company's total weekly gross profit assuming the table cleaner is processed further.
3. Compare the resulting net incomes and comment on management's decision.
(b) Using incremental analysis, determine whether the table cleaner should be processed further.

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Process Further Table Polish Table Table Stain Cleaner $225,000 70,000 Remover Total Production in litres Revenue Costs (9,000) 9,000 $180,000 9,000 $180,000 $360,000 CDG costs TCP costs 52,500 60,000 112,500 52,500 60,000 112,500 105,000b 120,000 225,000 Total costs 70,000 $155,000 Weekly gross profit $67,500 67,500 $135,000