Problem 21-3A Thompson Industrial Products Inc. (TIPI) 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, 855,000 ounces of chemical input are processed at a cost of $207,600 into 570,000 ounces of floor cleaner and 285,000 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 $257,800 FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $19 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 285,000 ounces of another compound (TCP) to the 285,000 ounces of table cleaner. This joint process will yield 285,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $103,000. 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 (TSR) Table Table Polish (TP) Total Cleaner Production in ounces285,000 $216,600 285,000 $171,000 285,000 $171,000 $342,000 Revenues Costs: CDG costs TCP costs 69,200 51,900 51,500 103,400 $67,600 51,900 103,800** 51,500 103,000 103,400 206,800 567,600 $135,200 Total costs 69,200 $147,400 Weekly gross profit If table cleaner is not processed further, it is allocated 1/3 of the $207,600 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,140,000 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 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit (3) Compare the resulting net incomes and comment on management's decision. Management made the Wrong ngdecision 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. (Enter negative amounts 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
