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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 cleaner
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, 913,500 ounces of chemical input are processed at a cost of $210,600 into 609,000 ounces of floor cleaner and 304,500 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 $253,200. Floor Shine sells at $22 per 30-ounce bottle. The table cleaner can be sold for $20 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 304,500 ounces of another compound (TCP) to the 304,500 ounces of table cleaner. This joint process will yield 304,500 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $104,000. 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 Remover Table (TSR) Polish (TP) 304,500 304,500 $182,700 $182,700 Total Table Cleaner 304,500 $243,600 Production in ounces Revenues $365,400 Costs: CDG costs 70,200 * 0 TCP costs Total costs 52,650 52,000 104,650 $78,050 52,650 105,300 ** 52,000 104,000 104,650 209,300 $78,050 $156,100 70,200 $173,400 Weekly gross profit *If table cleaner is not processed further, it is allocated 1/3 of the $210,600 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,218,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost. Using incremental analysis, determine if the table cleaner should be processed further. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Don't Process Table Cleaner Further Process Table Cleaner Further X Net Income Increase (Decrease) Incremental revenue 121800 Incremental costs X Totals should Table cleaner be processed further. By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor
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