ComeClean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most ofits products are processed independently, a few are related, such as the company's Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make. and it has a selling price of $4.20 a pound. A small portion of the annual production ofGrit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $4.00 perjar. This further processing requires onefourth pound of Grit 337 perjar of silver polish. The additional direct variable costs involved in the processing ofajar of silver polish are: Other ingredients $ 0.60 Direct labor 1.32 Total direct cost $ 1.92 Overhead costs associated with processing the silver polish are: Variable manufacturing overhead cost 25% of direct labor cost Fixed manufacturing overhead cost (per month) Production supervisor $ 3,200 Depreciation of mixing equipment $ 1,590 The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is special purpose equipment acquired specifically to produce the silver polish. It can produce up to 13,000jars of polish per month. lts resale value is negligible and it does not wear out through use. Advertising costs for the silver polish total $1,800 per month. Variable selling costs associated with the silver polish are 5% of sales. Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder. Required: 1. How much incremental revenue does the company earn perjar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your answer to 2 decimal places.) 2. How much incremental contribution margin does the company earn perjar of polish by further processing Grit 337 rather than selling it as a cleaning powder? {Round your intermediate calculations and final answer to 2 decimal places.) 3. How manyjars of silver polish must be sold each month to exactly offset the avoidable fixed costs incurred to produce and sell the polish? (Round your intermediate calculations to 2 decimal places.) 4. If the company sells 7,000jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling it as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) 5. If the company sells 10,900 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? {Enter any "disadvantages\" as a negative value. Round your intermediate calculations to 2 decimal places.) 1. Incremental revenue perjar 2 Incremental contribution margin perjar 3. Number ofjars that must be sold per month 4. Financial advantage (disadvantage) 5. Financial advantage (disadvantage) "In my opinion, we ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. \"At a price of $20 per drum, we would be paying $4.45 less than it costs us to manufacture the drums in our own plant. Since we use 65,000 drums at year, that would be an annual cost savings of $289,250.\" Antilles Refining's current cost to manufacture one drum is given below (based on 65,000 drums per year): Direct materials $ 18.95 Direct labor 2.88 Variable overhead 1.66 Fixed overhead ($2.59 general company overheadJ $1.66 depreciation, and $9.88 supervision) 4.98 Total cost per drum $ 24.45 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $156,000 per year. Alternative 2: Purchase the drums from an outside supplier at $20 per drum. The new equipment would be more efficient than the equipment that Antilles Refining has been using and. according to the manufacturer, would reduce direct labor and variable overhead costs by 25%. The old equipment has no resale value. Supervision cost {$52,000 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipments capacity would be 100,000 drums per year. The company's total general company overhead would be unaffected by this decision. Required: 1. Assuming that 65,000 drums are needed each year, what is the financial advantage [disadvantage] of buying the drums from an outside supplier? 2. Assuming that 80,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 3. Assuming that 100,000 drums are needed each year. what is the financial advantage (disadvantage) of buying the drums from an outside supplier? (For all requirements, enter any "disadvantages" as a negative value. Do not round intermediate calculations. Do not leave any cells blank.) 1 65000 drums 2 801300 drums 3 100:000 drums