How do I calculate the incremental costs for process table cleaner further ?
Problem 12-3 Culver Industrial Products Inc. is a diversied industrial-cleaner processing company. The company's Dargan plant produces two products: a table cleaner and a oor cleaner from a common set of chemical inputs (CDG). Each week, 927,000 ounces of chemical input are processed at a cost of $212,100 into 618,000 ounces of oor cleaner and 309,000 ounces 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 $245,000. FloorShine sells at $18 per 30-ounce bottle. The table cleaner can be sold for $18 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 309,000 ounces of another compound (TCP) to the 309,000 ounces of table cleaner. This joint process will yield 309,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $109,000. Both table products can be sold for $14 per 25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on the following analysis. Process Further Table Stain Table Remover Table Cleaner (TSR) Polish {TP} Total Production in ounces 309,000 309,000 309,000 Revenues $222,480 $173,040 $173,040 $346,080 Costs: CDG costs 70,700 * 53,025 53,025 106,050 ** TCP costs 0 54,500 54,500 109,000 Total costs 70,700 107,525 107,525 215,050 Weekly gross prot $151,780 $65,515 $65,515 $131,030 *If table cleaner is not processed further, it is allocated 1/3 of the $212,100 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,236,000 ounces. TSR and TP combined account for 50% 0f the total physical output and are each allocated 25% of the CDG cost. Your answer is 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 $ 136180 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit $ 150730 (3) Compare the resulting net incomes and comment on management's decision. Management made the- decision by choosing to not process table cleaner further. SHOW SOLUTION LINK TO TEXT Your answer is partially correct. Try again. Using incremental analysis, determine if the table cleaner should be processed further. (Ifamount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Don't Process Process Net Income Table Cleaner Table Cleaner Increase Further Further (Decrease) Incremental revenue $ 222,480 $ 346,080 $ 123600 . . Incremental costs - Totals $ 222480
