cleaning powder that costs $1.60 a pound to make and sells for $11.60 a pound. A small portion of Grit 337 is combined with several other ingredients and further processed into Sparkle silver polish. The silver polish sells for $6.00 per jar. This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional variable manufacturing costs per jar of silver polish are: Overhead costs associated with processing the silver polish are: The production supervisor has no duties other than overseeing production of the silver polish. The mixing equipment is specialpurpose equipment acquired specifically to produce the silver polish. It can produce up to 8,500 jars of polish per month. Its resale value is negligible and it does not wear out through use. Advertising costs for the silver polish total $1,500 per month. Variable selling costs for the silver polish are 5% of sales. Due to a decline in the demand for silver polish, the company is considering selling all of its Grit 337 for $11.60 per pound and discontinuing Sparkle silver polish. Required: 1. How much incremental revenue does the company earn per jar of polish by further processing Grit 337 father than selling it as a cleaning powder? 2. How much incremental contribution marain does the companv eam per lar of polish bv further processing Grit 337 rather than The production supervisor has no duties other than overseoing production of the silver polish. The mixing equipment is specialpurpose equipenent acquired specifically to produce the silver polish. It can produce up to 8.500 jars of polish per month. Its resale value is negligible and it does not wear out through use. Advertising costs for the silver polish total $1,500 per month. Variable selling costs for the silver polish are 5% of sales. Due to a decline in the demand for stver polish, the company is considering selling all of its Grit 337 for $1160 per pound and discontinuing Sparkle silver polish. Required: 1. How much incremental revenue does the company eorn per jor of polish by furthef processing Grit 337 rather than seling it as a cleaning powden? 2. How much incremental contribution margin does the company earn per jor of polish by further processing Grit 337 rather than selling it as a cleaning powider? 3. How many jars of silver polish must be sold each month to exactly offset the avoldable fixed costs incurred to produce and sell the polish? 4. If the company selis 7,500 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather thon seling it as a cleaning powder? 5. If the company sells 11,600 jars of polish; what is the financial advantage (disadvantage) of choosing to further process Git 337 rather than selling it as a cleaning powder
