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,846,000ounces of chemical input are processed at a cost of $209,100into564,000ounces of floor cleaner and282,000ounces 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 $19per 30-ounce bottle. The table cleaner can be sold for $19per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding282,000ounces of another compound (TCP) to the282,000ounces of table cleaner. This joint process will yield282,000ounces 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 $15per 25-ounce bottle.

The company decided not to process the table cleaner into TSR and TP based on the following analysis.

Process Further

TableCleaner Table StainRemover (TSR) TablePolish (TP) Total

Production in ounces 282,000 282,000 282,000 -

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

*If table cleaner is not processed further, it is allocated 1/3 of the $209,100of CDG cost, which is equal to 1/3 of the total physical output.

**If table cleaner is processed further, total physical output is1,128,000ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.

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.

Total weekly gross profit$

(2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further.

Total weekly gross profit$

(3) Compare the resulting net incomes and comment on management's decision.

Management made thewrong/right decision by choosing to not process table cleaner further.