BlueIndustrial Products Inc. is a diversified industrial-cleaner processing company. The company's Dargan plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week,873,000ounces of chemical input are processed at a cost of $207,300into582,000ounces of floor cleaner and291,000ounces 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 amount to $253,500.

FloorShine sells at $22per 30-ounce bottle. The table cleaner can be sold for $20per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding291,000ounces of another compound (TCP) to the291,000ounces of table cleaner. This joint process will yield291,000ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $102,000. Both table products can be sold for $15per 25-ounce bottle.

The company decided not to process the table cleaner into TSR and TP based on the following analysis.

Process FurtherTable

CleanerTable Stain

Remover (TSR)Table

Polish (TP)TotalProduction in ounces291,000291,000291,000Revenues$232,800$174,600$174,600$349,200Costs:CDG costs69,100*51,82551,825103,650**TCP costs051,00051,000102,000Total costs69,100102,825102,825205,650Weekly gross profit$163,700$71,775$71,775$143,550

*If table cleaner is not processed further, it is allocated 1/3 of the $207,300of CDG cost, which is equal to 1/3 of the total physical output.

**If table cleaner is processed further, total physical output is1,164,000ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.

Partially correct answer icon

Your answer is partially correct.

Determine if management made the correct decision to not process the table cleaner further by doing the following.

(1) Calculate the company's total weekly gross profit assuming the table cleaner is not processed further.

Total weekly gross profit$

(2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further.

Total weekly gross profit$

(3) Compare the resulting net incomes and comment on management's decision.

Management made the wrongrightdecision by choosing to not process table cleaner further.