Problem 11-27 (Static) Sell or Process Further Decisions [LO11-7] 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 $1.60 a pound to make, and it has a selling price of $2.00 a pound. A smbll portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredlents 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 varlable costs involved in the processing of a jar of silver polish are: Overhead costs associated with processing the silver polish are: If direct labor cost The production supervisor has no duties other than to oversee production of the siver polish. The mixing equipment is special. purpose equipment acquired specifically to produce the silver polish. It can produce up to 15.000 jars of pollsh per month. Its resale value is negiligible and it coes not wear out through use. Advertising costs for the 5liver polish total $4,000 per month, Variable selling costs associated with the siver 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 mannger feels that tit would be more profitable to sell all of the Grit 337 as a cleaning powder. Required: 1. How much incremental revenue does the company earn per jar of pollsh by further processing Grit 337 rather than selling it as a cleaning powder? (Round your answer to 2 decimal places.) 2. How much licremental contribution margin does the company eam per jar of pollish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your intermediate calculations and final answer to 2 decimal places.) 3. How many jars of stiver polish must be sold each month to exactly offset the avoldable fixed costs incurred to produce and sell the pollsh? (Aound your intermediate calculations to 2 decimal places.) 4. If the company selts 9,000 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling t as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) 5. If the company sells 11,500 jars of pollsh, what is the financial advartage (disadvantogel of choosing to further process Grit 337 rother than seling is as i cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.] Profits have been decreasing for several years at Pegasus Airlines, In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (filght 482 ) is as follows: The following additional information is avallable about fight 482 . a. Members of the fight crew are paid fixed annual salarles, whereas the fight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against filght 482 because in the opinion of the insurance company. the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to dtop filght 482 . c. The baggage loading and filght preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment Dropping night 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If filght 482 is oropped, Pegasus Airlines has no authorization at present to replace it with another fight. e. Alrcraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew an its payrol. Required
