Question

Bridgeport Industrial Products Inc. 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 $212,700 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 $259,300. FloorShine sells at $19 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 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 $101,000. Both table products can be sold for $16 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 Cleaner Table Stain Remover (TSR) Table Polish (TP) Total Production in ounces 282,000 282,000 282,000 Revenues $225,600 $180,480 $180,480 $360,960 Costs: CDG costs 70,900 * 53,175 53,175 106,350 ** TCP costs 0 50,500 50,500 101,000 Total costs 70,900 103,675 103,675 207,350 Weekly gross profit $154,700 $76,805 $76,805 $153,610 *If table cleaner is not processed further, it is allocated 1/3 of the $212,700 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,128,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.

Answer 1

Page Date:11_Page No.: (1) - Company's the table Total weekly cleaner is not gross proft assuming processed further - Table cleaner floorshine Total Revenue 282000 × $20 564000 x 19 25 30 - $225600 - $357200 $ 582800 Costs : CDg costs ($70900) ($141800) ($212700) | Rouns cost of Floorchive ($299300) ($259300) . Weekly gron profit $154700 ($43900) $110800 Total weekly groß profit = $110800

Page Date: _ _Page No.: Date: , , Page No: profit assuming (2) company's - Table Cleaner Total weekly is prouned gross further Table stein Floorshire Total Remover Table Polish (TP) (TSR) Reernue 282000 x 16 282000 8 16 25 = $180480 = $180480 $357200 $718160 CDG cost $(53175) $(53155) ($10650) ($212700) Process cost of floorshine ($259300) TCP costs ($50500) ($50500) ($259300) | ($101000) Total weekly por probt $76805 $76805 ($8450) $145160 - Total weekly gross proft: $145160 (2) - Management to not made process the WRONG table cleaner decision by choosing further