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REP Come - Clean Corporation produces a varlety of cleaning compounds Including Grit 3 3 7 and Sparkle silver polish. Grit 3 3 7 is

REP Come-Clean Corporation produces a varlety of cleaning compounds Including Grit 337 and Sparkle silver polish. Grit 337 is a coarse
cleaning powder that costs $1.20 a pound to make and sells for $260 a pound. A small portion of Grit 337 is combined with several
other Ingredients and further processed Into Sparkle silver polish. The silver polish sells for $4.00 per Jar.
This further processing requires one-fourth pound of Grit 337 per Jar of silver polish. The additional varlable manufacturing costs per Jar
of silver polish are:
Overhead costs assoclated with processing the silver polish are:
The productlon supervisor has no dutles other than overseelng production of the silver polish. The mixing equipment is special-
purpose equipment acqulred specifically to produce the silver polish. It can produce up to 5,500 Jars of polish per month. Its resale
value is negligible and it does not wear out through use.
Advertising costs for the silver polish total $4,600 per month. Varlable selling costs for the silver pollsh are 5% of sales.
Due to a decline in the demand for silver polish, the company is considering selling all of Its Grit 337 for $260 per pound and
dlscontinuing Sparkle silver polish.
Required:
How much incremental revenue does the company earn per Jar of polish by further processing Grit 337 rather than selling It as a
cleaning powder?
How much incremental contributlon margin does the company earn per Jar of polish by further processing Grit 337 rather than
selling it as a cleaning powder?
How many Jars of silver polish must be sold each month to exactly offset the avoldable fixed costs incurred to produce and sell the
polish?
If the company sells 8,600 Jars of polish, what is the financlal advantage (disadvantage) of choosing to further process Grit 337
rather than selling it as a cleaning powder?
If the company sells 11,400 Jars of polish, what is the financlal advantage (disadvantage) of choosing to further process Grit 337
rather than selling it as a cleaning powder?
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