Problem 12-3 Sheffield 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, 877,500 ounces of chemical input are processed at a cost of $212,400 into 585,000 ounces of floor cleaner and 292,500 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 $250,300. FloorShine sells at $22 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 292,500 ounces of another compound (TCP) to the 292,500 ounces of table cleaner. This joint process will yield 292,500 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 $15 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 Table (TSR) Polish (TP) 292,500 292,500 $175,500 $175,500 Table Cleaner 292,500 $234,000 Total $351,000 Production in ounces Revenues Costs: CDG costs TCP costs Total costs Weekly gross profit 70,800 * 53,100 50,500 103,600 $71,900 53,100 50,500 103,600 $71,900 106,200 ** 101,000 207,200 $143,800 70,800 $163,200 *If table cleaner is not processed further, it is allocated 1/3 of the $212,400 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,170,000 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 partially correct. Try again. 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 143,800 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit lll 163200 (3) Compare the resulting net incomes and comment on management's decision. 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 Incremental costs Totals LINK TO TEXT
