Problem 12-3 Bridgeport Industrial Products Inc. is a diversified industrial-cleaner processing company. 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, 846,000 ounces of chemical input are processed at a cost of $212,700 into 564,000 ounces of floor cleaner and 282,000 ounces 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 $259,300. FloorShine sells at $19 per 30-ounce bottle. The table cleaner can be sold for $20 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 282,000 ounces of another compound (TCP) to the 282,000 ounces of table cleaner. This joint process will yield 282,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $101,000. Both table products can be sold for $16 per 25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on the following analysis. Process Further Table Stain Remover (TSR) 282,000 $180,480 Total Table Cleaner 282,000 $225,600 Production in ounces Table Polish (TP) 282,000 $180,480 Revenues $360,960 Costs: CDG costs 70,900 * 53,175 50,500 TCP costs 0 53,175 50,500 103,675 $76,805 106,350 ** 101,000 207,350 $153,610 Total costs Weekly gross profit 70,900 $154,700 103,675 $76,805 *If table cleaner is not processed further, it is allocated 1/3 of the $212,700 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,128,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost. Your answer is correct. 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. Total weekly gross profit 110800 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit Total weekly gross profit 145160|| (3) Compare the resulting net incomes and comment on management's decision. wro Management made the decision by choosing to not process table cleaner further. Your answer is partially correct. Try again. Using incremental analysis, determine if the table cleaner should be processed further. (If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Don't Process Table Cleaner Further Process Table Cleaner Further Net Income Increase (Decrease) Incremental revenue J 225600 tA Incremental costs 01000 -101000 Totals 225600
