QUESTION 2

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 $1.20 a pound to make, and it has a selling price of $7.80 a pound.A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $5.00 per jar.

This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct variable costs involved in the processing of a jar of silver polish are:

1. Incremental revenue per jar 2. Incremental contribution margin per jar 3. Number of jars that must be sold per month 4. Financial advantage (disadvantage) 5. Financial advantage (disadvantage)Other ingredients $ 0.60 Direct labor 1.36 Total direct cost $ 1.96 Overhead costs associated with processing the silver polish are: Variable manufacturing overhead cost 25% of direct labor cost Fixed manufacturing overhead cost (per month) Production supervisor $ 3,100 Depreciation of mixing equipment $ 1, 500