Miramichi Industrial Products Co. is a diversified industrial-cleaner processing company. The company's main plant produces two products: a table cleaner and a floor cleaner. They are made from a common set of chemical inputs (called CDG). Each week the company processes 28.800 litres of chemical input at a cost of $211,800 into 19.200 litres of floor cleaner and 9,600 litres of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name Floor Shine. The additional processing costs for this conversion total $250,100. Floor Shine sells at $20 per one-litre bottle. The table cleaner can be sold for $25 per one-litre bottle. However, the table cleaner can be converted into two other products by adding 9.600 litres of another compound (TCP) to the 9.600 litres of table cleaner. This joint process will yield 9.600 litres each of table stain remover and table polish. The additional processing costs for this process are $126,500. Both table products can be sold for $21 per one litre bottle. The company decided not to process the table cleaner into table stain remover and table polish based on the following analysis. Table Cleaner (9,600) $240.000 Table Stain Remover 9.600 $201.600 Process Further Table Polish Total 9,600 $201.600 $403.200 Production in litres Table Cleaner (9.600) $240,000 Production in litres Table Stain Remover 9,600 $201.600 Process Further Table Polish Total 9,600 $201,600 $403.200 70.600 Revenue Costs: CDG costs TCP costs Total costs Weekly gross profit 52.950 63,250 116,200 $85,400 52.950 63.250 116.200 $85.400 105.900 126,500 232,400 $170,800 70,600 $169.400 * of the table cleaner is not processed further, it is allocated one-third of the S211.800 of CDG cost, which is equal to one-third of the total physical output bif the table cleaner is processed further the total physical output is 38,400 litres. Table stain remover and table polish combined account for 50% of the total physical output and are each allocated 25% of the CDG cost Do the following to determine whether management made the correct decision by not processing the table cleaner further, (1) Calculate the company's total weekly gross profit assuming the table cleaner is not processed further Do the following to determine whether management made the correct decision by not processing the table deaner further. (1) Calculate the company's total weekly gross profit assuming the table cleaner is not processed further. Company's total weekly gross profit $ (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Company's total weekly gross profit $ (3) Compare the resulting net incomes and comment on management's decision Management made the decision by choosing to not process table cleaner further Using incremental analysis, determine whether the table cleaner should be processed further. If an amount reduces the net ome then enter with a negative sign preceding the number, eg-15.000 or parenthesis es (15,000)) Using incremental analysis, determine whether the table cleaner should be processed further. Of an amount reduces the net Income then enter with a negative sin preceding the number, c. 15,000 or parenthesis of (15.000 Don't Process Net Income Further Process Further Increase (Decrease) Incremental revenues $ $ $ Incremental costs Totals $ $ The table cleaner be processed further
