Problem 7-3A Thompson Industrial Products Inc. (TIPI) is a diversified industria
ID: 2515109 • Letter: P
Question
Problem 7-3A 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, 855,000 ounces of chemical input are processed at a cost of $207,000 into 570,000 ounces of floor cleaner and 285,000 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 $250,900 FloorShine sells at $18 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 285,000 ounces of another compound (TCP) to the 285,000 ounces of table cleaner This joint process will yield 285,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $101,000. 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 (TSR) Table Polish (TP) Table Total Cleaner 285,000 $216,600 285,000 $171,000 $342,000 285,000 Production in ounces Revenues Costs: $171,000 51,750 50,500 102,250 $68,750 CDG costs 69,000 * 51,750 103,500 ** TCP costs 50,500 101,000 102,250 204,500 $68,750 $137,500 Total costs 69,000 Weekly gross profit $147,600 If table cleaner is not processed further, it is allocated 1/3 of the $207,000 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,140,000 ounces. TSR and TP combined account for 50% of the totalExplanation / Answer
Answer
1 $1,48,000
2. $181,300
3. Wrong
Incremental revenue $135,300
Incremantal cost $$102,000
Total 33,300