Zytel Corporation produces
cleaning compounds and solutions for industrial and household use.
While most of its products are processed independently, a few are
related. Grit 337, a coarse cleaning powder with many industrial
uses, costs $2.00 a pound to make and sells for $3.20 a pound. A
small portion of the annual production of this product is retained
for further processing in the Mixing Department, where it is
combined with several other ingredients to form a paste, which is
marketed as a silver polish selling for $4.10 per jar. This further
processing requires 1/4 pound of Grit 337 per jar. Costs of other
ingredients, labor, and variable overhead associated with this
further processing amount to $2.30 per jar. Variable selling costs
are $0.60 per jar. If the decision were made to cease production of
the silver polish, $8,800 of Mixing Department fixed costs could be
avoided. Zytel has limited production capacity for Grit 337, but
unlimited demand for the cleaning powder. Required: Calculate the
minimum number of jars of silver polish that would have to be sold
to justify further processing of Grit 337. (Round your intermediate
calculations to 2 decimal places and final answer to the nearest
whole number.)
Solution:
Computation of Additional contribution Margin- If Grit 377 sold after further processing | |||
Particulars | Grit 377 per 1/4 Pound | Silver Polish per jar | Net Increase/ (decrease) |
Selling price per unit | $0.80 | $4.10 | $3.30 |
Variable Costs: | |||
Making cost of Grit 337 | $0.50 | $0.50 | $0.00 |
Other ingredient, labor and overhead | $0.00 | $2.30 | $2.30 |
Variable Selling Cost | $0.00 | $0.60 | $0.60 |
Total variable costs | $0.50 | $3.40 | $2.90 |
Contribution margin | $0.30 | $0.70 | $0.40 |
Minimum number of jars of silver polish that must be sold each month = Avoidable fixed cost / incremental contribution margin per jar
= $8,800 / $0.40 = 22,000 jars
Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its...
Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $2.40 a pound to make and sells for $3.60 a pound. A small portion of the annual production of this product is retained for further processing in the Mixing Department, where it is combined with several other ingredients to form a paste, which is marketed...
Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $2.60 a pound to make and sells for $3.80 a pound. A small portion of the annual production of this product is retained for further processing in the Mixing Department, where it is combined with several other ingredients to form a paste, which is marketed...
Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $2.60 a pound to make and sells for $3.80 a pound. A small portion of the annual production of this product is retained for further processing in the Mixing Department, where it is combined with several other ingredients to form a paste, which is marketed...
Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $2.60 a pound to make and sells for $3.80 a pound. A small portion of the annual production of this product is retained for further processing in the Mixing Department, where it is combined with several other ingredients to form a paste, which is marketed...
Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $3.20 a pound to make and sells for $4.40 a pound. A small portion of the annual production of this product is retained for further processing in the Mixing Department, where it is combined with several other ingredients to form a paste, which is marketed...
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $3.20 a pound. A small portion of the annual production of Grit 337 is retained in...
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $7.00 a pound. A small portion of the annual production of Grit 337 is retained in...
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.20 a pound to make, and it has a selling price of $11.40 a pound. A small portion of the annual production of Grit 337 is retained in...
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.20 a pound to make, and it has a selling price of $6.80 a pound. A small portion of the annual production of Grit 337 is retained in...
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.20 a pound to make, and it has a selling price of $7.80 a pound. A small portion of the annual production of Grit 337 is retained in...