$3$

Exercise $11-28($Static$)$ Sell$-$or$-$Process$-$Further Decision; Product Mix $[$LO $11-4,11-7]$

$5$ points

References

Cantel Company produces cleaning compounds for both commercial and household customers. Some of these products are produced as part of a joint manufacturing process. For example, GR$37,$ a coarse cleaning powder meant for commercial sale, costs $$1\mathrm{.}60$ a pound to make and sells for $$2\mathrm{.}00$ per pound. A portion of the annual production of GR$37$ is retained for further processing in a separate department where it is combined with several other ingredients to form SilPol, which is sold as a silver polish, at $$4\mathrm{.}00$ per unit. The additional processing requires $\frac{1}{4}$ pound of GR$37$ per unit; additional processing costs amount to $$2\mathrm{.}50$ per unit of SilPol produced. Variable selling costs for SilPol average $$0\mathrm{.}30$ per unit. If production of SilPol were discontinued, $$5,600$ of costs in the processing department would be avoided. Cantel has, at this point, unlimited demand for, but limited capacity to produce, product GR$37.$

Required:

Calculate the minimum number of units of SilPol that would have to be sold in order to justify further processing of GR$37.$

Assume that the cost data reported for GR$37$ are obtained at a level of output equal to $5,000$ pounds, which is the maximum that the company can produce at this time. What is the expected operating income $($loss$)$ under each of the following scenarios: $($a$)$ all available capacity is used to produce GR$37,$ but no SilPol; $($b$)4,000$ units of SilPol are produced, with the balance of capacity devoted to the production and sale of GR$37$; $($c$)8,000$ units of SilPol are produced, with the balance of capacity devoted to the production and sale of GR$37$; and $($d$)10,000$ units of SilPol are produced, with the balance of capacity devoted to the production and sale of GR$37.$

Complete this question by entering your answers in the tabs below.

Required $1$

Assume that the cost data reported for GR$37$ are obtained at a level of output equal to $5,000$ pounds, which is the maximum that the company can produce at this time. What is the expected operating income $($loss$)$ under each of the following scenarios: $($a$)$ all available capacity is used to produce GR$37,$ but no SilPol; $($b$)4,000$ units of SilPol are produced, with the balance of capacity devoted to the production and sale of GR$37$; $($c$)8,000$ units of SilPol are produced, with the balance of capacity devoted to the production and sale of GR$37$; and $($d$)10,000$ units of SilPol are produced, with the balance of capacity devoted to the production and sale of GR$37.($Loss amounts should be indicated with a minus sign.$)$

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$\backslash$table$[[,,$Units of SilPol produced$/$Sold$,,,],[,,,,,],[$Operating income $($loss$),,,4,000,8,000,10,000],[,,,,,]]$