Question #2 15 Marks Determine if product should be sold or processed further. Thompson Industrial Products Inc. (TIPI) is a diversified industrial-cleaner processing company. The company's Dargar plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week 900,000 ounces of chemical input are processed at a cost of $210,000 into 600,000 ounces of floor cleaner and 300,000 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name Floor Shine. The additional processing costs for this conversion amount to $240,000 8 9 FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $17 per 25-ounce bottle. However, the table 10 cleaner can be converted into two other products by adding 300,000 ounces of another compound (TCP) to the 300,000 ounces 11 of table cleaner. This joint process will yield 300,000 ounces each of table stain remover (TSR) and table polish (TP). The 12 additional processing costs for this process amounts to $100,000. Both table products can be sold for $14 per $25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on the following analysis 13 14 15 16 17 Table Cleaner 300,000 $204.000 Process Further Table Stain Table Remover (TSR) Polish (TP) 300,000 300,000 $ 168,000 $168,000 Total 18 19 20 21 $336,000 Production in ounces Revenue Costs CDG costs TCP costs Total costs Weekly gross profit ** 22 23 70000* 0 70,000 $134,000 52,500 50,000 102.500 $65.500 52,500 50,000 102,500 $65,500 105,000 100,000 205,000 $131,000 24 25 26 27 *If table cleaner is not processed further it is allocated 1/3 of the $210,000 of CDG cost, which is equal to 1/3 of the total physical output Process Further Table Stain Table Remover (TSR) Polish (TP) 300,000 300,000 $168,000 $168,000 Table Cleaner 300,000 $204.000 Total $336,000 ** Production in ounces Revenue Costs CDG costs TCP costs Total costs Weekly gross profit 70000* 0 70,000 $134,000 52,500 50,000 102,500 $65,500 52,500 50,000 102,500 $65,500 105,000 100,000 205,000 $131,000 *lf table cleaner is not processed further, it is allocated 1/3 of the $210,000 of CDG cost, which is equal to 1/3 of the total physical output. ** If table cleaner is processed further, total physical output is 1,200,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost. Instructions (a) 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 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. (3) Compare the resulting net incomes and comment on management's decision. (b) Using incremental analysis, determine if the table cleaner should be processed further. NOTE: Enter a number in cells requesting a value, enter either a number or a formula in cells with a