Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 1 3 - 2 7 ( Algo ) Sell or Process Further Decisions [ LO 1 3 - 7 ] Come - Clean Corporation

image text in transcribed
Problem 13-27(Algo) Sell or Process Further Decisions [LO13-7]
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 $2.60 a pound to make, and it has a selling price of $4.00 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 $4.00 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 7.5% 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.)
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting A Contemporary Approach

Authors: David Haddock, John Price, Michael Farina

4th edition

978-1259995057, 1259995054, 978-0077503987, 77503988, 978-0077639730

More Books

Students also viewed these Accounting questions

Question

Why is it important to analyze your spending habits?

Answered: 1 week ago

Question

How are the signs of stress, burnout, and reality shock related?

Answered: 1 week ago