Problem $13-27($Algo$)$ Sell or Process Further Decisions $[$LO$13-7]$

Come$-$Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most

of its products are processed independently, a few are related, such as the company's Grit $337$ and its Sparkle silver polish.

Grit $337$ is a coarse cleaning powder with many industrial uses. It costs $$2\mathrm{.}60$ a pound to make, and it has a selling price of $$4\mathrm{.}00$ a

pound. A small portion of the annual production of Grit $337$ is retained in the factory for further processing. It is combined with several

other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $$4\mathrm{.}00$ per jar.

This further processing requires one$-$fourth pound of Grit $337$ per jar of silver polish. The additional direct variable costs involved in the

processing of a jar of silver polish are:

Overhead costs associated with processing the silver polish are:

The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is special$-$

purpose equipment acquired specifically to produce the silver polish. It can produce up to $16,000$ jars of polish per month. Its resale

value is negligible and it does not wear out through use.

Advertising costs for the silver polish total $$4,530$ per month. Variable selling costs associated with the silver polish are $7\mathrm{.}5\%$ of sales.

Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The

sales manager feels that it would be more profitable to sell all of the Grit $337$ as a cleaning powder.

Required:

How much incremental revenue does the company earn per jar of polish by further processing Grit $337$ rather than selling it as a

cleaning powder? $($Round your answer to $2$ decimal places.$)$

How much incremental contribution margin does the company earn per jar of polish by further processing Grit $337$ rather than

selling it as a cleaning powder? $($Round your intermediate calculations and final answer to $2$ decimal places.$)$

How many jars of silver polish must be sold each month to exactly offset the avoidable fixed costs incurred to produce and sell the

polish? $($Round your intermediate calculations to $2$ decimal places.$)$

If the company sells $11,000$ jars of polish, what is the financial advantage $($disadvantage$)$ of choosing to further process Grit $337$

rather than selling it as a cleaning powder? $($Enter any "disadvantages" as a negative value. Round your intermediate calculations to

$2$ decimal places.$)$

If the company sells $14,000$ jars of polish, what is the financial advantage $($disadvantage$)$ of choosing to further process Grit $337$

rather than selling is as a cleaning powder? $($Enter any "disadvantages" as a negative value. Round your intermediate calculations

to $2$ decimal places.$)$