Problem $13-29($Algo$)$ Sell or Process Further Decisions $[$LO$13-7]$

Come$-$Clean Corporation produces a variety of cleaning compounds including Grit $337$ and Sparkle silver polish. Grit $337$ is a coarse cleaning powder that costs $$1\mathrm{.}20$ a pound to make and sells for $$10\mathrm{.}80$ a pound. A small portion of Grit $337$ is combined with several other ingredients and further processed into Sparkle silver polish. The silver polish sells for $$6\mathrm{.}00$ per jar.

This further processing requires one$-$fourth pound of Grit $337$ per jar of silver polish. The additional variable manufacturing costs per jar of silver polish are:

Other ingredients $ $0\mathrm{.}60$

Direct labor $1\mathrm{.}44$

Additional variable manufacturing cost $ $2\mathrm{.}04$

Overhead costs associated with processing the silver polish are:

Variable manufacturing overhead cost $25\%$ of direct labor cost

Fixed manufacturing overhead cost $($per month$)$

Production supervisor $ $3,300$

Depreciation of mixing equipment $ $1,400$

The production supervisor has no duties other than overseeing production of the silver polish. The mixing equipment is special$-$purpose equipment acquired specifically to produce the silver polish. It can produce up to $12,500$ 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 $$2,700$ per month. Variable selling costs for the silver polish are $5\%$ of sales.

Due to a decline in the demand for silver polish, the company is considering selling all of its Grit $337$ for $$10\mathrm{.}80$ per pound and discontinuing Sparkle silver polish.

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?

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?

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?

If the company sells $7,600$ jars of polish, what is the financial advantage $($disadvantage$)$ of choosing to further process Grit $337$ rather than selling it as a cleaning powder?

If the company sells $10,400$ jars of polish, what is the financial advantage $($disadvantage$)$ of choosing to further process Grit $337$ rather than selling it as a cleaning powder?