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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
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, 846,000 ounces of chemical input are processed at a cost of $209,100 into 564,000 ounces of floor cleaner and 282,000 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 $258,100. FloorShine sells at $19 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 282,000 ounces of another compound (TCP) to the 282,000 ounces of table cleaner. This joint process will yield 282,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $110,000. 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 Table Cleaner Production in ounces 282,000 Remover (TSR) 282,000 Table Polish (TP) Total 282,000 Revenues $214,320 $169,200 $169,200 $338,400 Costs: CDG costs 69,700 52,275 52,275 104,550 TCP costs 0 55,000 55,000 110,000 Total costs 69,700 107,275 107,275 214,550 Weekly gross profit $144,620 $61,925 $61,925 $123,850 **
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