Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please help me solve this q De or P7.3 (LO4), AN Thompson Industrial Products (TIP) is a diversified industrial-cleaner processing com- pany. The company's Dargan
please help me solve this q
De or P7.3 (LO4), AN Thompson Industrial Products (TIP) is a diversified industrial-cleaner processing com- pany. 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, 900,000 liters of chemical input are processed at a cost of 210,000 into 600.000 liters of floor cleaner and 300,000 liters 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 240,000. Floor Shine sells at 20 per 30-liter bottle. The table cleaner can be sold for 17 per 25-liter bottie However, the table cleaner can be converted into two other products by adding 300,000 liters of another compound (TCP) to the 300,000 liters of table cleaner. This joint process will yield 300.000 liters each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to 100,000. Both table products can be sold for 14 per 25-liter 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 Polish Cleaner (TSR) (TP) Total Production in liters 300,000 300,000 300,000 Revenues 204,000 168,000 168,000 336,000 Costs: CDG costs 70,000 52,500 $2,500 105,000 TCP costs 50,000 50.000 100,000 Total costs 70,000 102,500 102,500 205,000 Weekly gross profit 134,000 65.500 65,500 131,000 "If table cleaner is not processed further, it is allocated 113 of the 210,000 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,200.000 liters. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost. Instructions a. 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 2. Calculate the company's total weekly gross profit assuming the table cleaner is processed further. 3. Compare the resulting net incomes and comment on management's decision. b. Using incremental analysis, determine if the table cleaner should be processed further Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started