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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 ComeClean Corporation produces a varlety of cleaning compounds Including Grit and Sparkle silver polish. Grit is a coarse
cleaning powder that costs $ a pound to make and sells for $ a pound. A small portion of Grit is combined with several
other Ingredients and further processed Into Sparkle silver polish. The silver polish sells for $ per Jar.
This further processing requires onefourth pound of Grit 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 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 $ per month. Varlable selling costs for the silver pollsh are of sales.
Due to a decline in the demand for silver polish, the company is considering selling all of Its Grit for $ per pound and
dlscontinuing Sparkle silver polish.
Required:
How much incremental revenue does the company earn per Jar of polish by further processing Grit 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 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 Jars of polish, what is the financlal advantage disadvantage of choosing to further process Grit
rather than selling it as a cleaning powder?
If the company sells Jars of polish, what is the financlal advantage disadvantage of choosing to further process Grit
rather than selling it as a cleaning powder?
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