Miramichi Industrial Products Co. is a diversified industrial-cleaner processing company. The companys 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 27,000 litres of chemical input at a cost of $207,000 into 18,000 litres of floor cleaner and 9,000 litres 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 total $240,000.

FloorShine sells at $15 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 9,000 litres of another compound (TCP) to the 9,000 litres of table cleaner. This joint process will yield 9,000 litres each of table stain remover and table polish. The additional processing costs for this process are $120,000. Both table products can be sold for $20 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:

Process Further

Table

Cleaner Table Stain

Remover Table

Polish Total

Production in litres

(9,000)

9,000

9,000

Revenue

$225,000

$180,000

$180,000

$360,000

Costs:

CDG costs 69,000a 51,750 51,750 103,500b

TCP costs

0

60,000

60,000

120,000

Total costs

69,000

111,750

111,750

223,500

Weekly gross profit

$156,000

$68,250

$68,250

$136,500

a If the table cleaner is not processed further, it is allocated one-third of the $207,000 of CDG cost, which is equal to one-third of the total physical output.

b If the table cleaner is processed further, the total physical output is 36,000 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.

Companys total weekly gross profit

$

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

Companys 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 income then enter with a negative sign preceding the number, e.g.-15,000 or parenthesis, e.g. (15,000).)

Don't Process

Further

Process Further Net Income

Increase (Decrease)

Incremental revenues $

$

$

Incremental costs

Totals $

$

$

The table cleaner

be processed further.

Chapter 7 Question 3 of 10 -/5 Using incremental analysis, determine whether the table cleaner should be processed further. Of an amount reduces the net income then enter with a negative sign preceding the number, 28-15,000 or parenthesis, es. (15,0001) Don't Process Net Income Further Process Further Increase (Decrease) Incremental revenues $ Incremental costs Totals The table cleaner be processed further -/5 III * Mirarichi 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 27.000 litres of chemical input at a cost of $207,000 into 18,000 litres of floor cleaner and 9000 litres 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 total $240,000. Floor Shine sells at $15 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 9,000 litres of another compound (TCP) to the 9,000 litres of table cleaner. This joint process will yield 9.000 litres each of table stain remover and table polish. The additional processing costs for this process are $120.000. Both table products can be sold for $20 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 19.000) $225.000 Table Stain Remover 9,000 $180,000 Process Further Table Polish Total 9.000 $180.000 $360,000 Production in litres Rovenue Costs Corner M QING pe here to search mework #4 Chapter 7 Question 3 of 10 -75 E 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. Company's total weekly gross profit $ (2) Calculate the company's total weekly gross proht 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 tablebeteaner further. EN Using incremental analysis, determine whether the table cleaner should be processed further or an amount reduces the net RI O here to search Chapter 7 Question 3 of 10 -15 Net Income Using incremental analysis, determine whether the table cleaner should be processed further. (If an amount reduces the net income then enter with a negative sign preceding the number, es-15,000 or parenthesis, es. (15,000.) Don't Process Further Process Further Increase (Decrease) Incremental revenues $ Incremental costs Totals $ The table cleaner be processed further -/5 III ov 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 27,000 litres of chemical input at a cost of $207,000 into 18,000 litres of floor cleaner and 9.000 litres 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 total $240,000 Floor Shine sells at $15 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 9.000 litres of another compound (TCP) to the 9,000 litres of table cleaner. This joint process will yield 9.000 litres each of table stain remover and table polish. The additional processing costs for this process are $120.000. Both table products can be sold for $20 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 19.000) $225.000 Table Stain Remover 9.000 $180,000 Process Further Table Polish Total 9.000 $180.000 $360,000 Production in litres Revenue Costs CoGrch 14 NE pe here to search mework #4 Chapter 7 Question 3 of 10 -/5 Table Cleaner 19.000) $225,000 Table Stain Remover 9.000 $180,000 Process Further Table Polish Total 9.000 $180,000 $360,000 Production in litres Revenue Costs: CDG costs TCP costs Total costs Weekly gross profit 69.000 0 69,000 $156,000 51.750 60.000 111.750 $68.250 51.750 60,000 111.750 $68,250 103,500 120.000 223.500 $136.500 -If the table cleaner is not processed further it is allocated one-third of the 5207 pod of CG cost, which is equal to one-third of the total physical output Dif the table cleaner is processed further the total physical output is 36,000 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