Pharoah Industrial Products Inc. (PIPI) is a diversified industrial-cleaner processing company. The company's Dargan plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week, 877,500 ounces of chemical input are processed at a cost of $212,400 into 585,000 ounces of floor cleaner and 292,500 ounces 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 amount to $250,300. Floor Shine sells at $22 per 30-ounce bottle. The table cleaner can be sold for $20 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 292,500 ounces of another compound (TCP) to the 292,500 ounces of table cleaner. This joint process will yield 292,500 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $101,000. Both table products can be sold for $15 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 Remover (TSR) Table Cleaner Table Polish (TP) Total Production in ounces 292,500 292.500 292,500 Revenues $234,000 $175,500 $175,500 $351,000 Costs: CDG costs 70.800 53,100 53,100 106.200 TCP costs 0 50,500 50,500 101,000 Total costs 70,800 103.600 103,600 207,200 Weekly gross profit $163,200 $71,900 $71,900 $143,800 (a) 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 200300 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit $ 216300 (3) Compare the resulting net incomes and comment on management's decision. Management made the wrong decision by choosing to not process table cleaner further. (b) Using incremental analysis, determine if the table cleaner should be processed further. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Don't Process Table Cleaner Further Process Table Cleaner Further Net Income Increase (Decrease) Incremental revenue $ $ $ Incremental costs Totals $ $ Table cleaner should not be processed further. e Textbook and Media Save for Later Last saved 7 minutes ago. Attempts: 0 of 3 used Submit
