Question

69,000 * CDG costs TCP costs Total costs Weekly gross profit 51,750 52,000 103,750 $67,250 51,750 52,000 103,750 $67,250 103,500 ** 104,000 207,500 $134,500 69,000 $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 to **If table cleaner is processed further, total physical output is 1,140,000 ounces. TSR and TP combined account for 50% Your answer is partially correct. Try again. 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 216,600 (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit 238,000 (3) Compare the resulting net incomes and comment on management's decision. Management made the decision by choosing to not process table cleaner further.

Answer 1

Solution: Part 1: Total 285000 Floor cleaner Table cleaner 570000 301 19000 11400 21 Ounces Yield / ounces per bottle No of bottles Price per bottle Total revenue Less : Cost of production Additional Processing cost Total weekly Gross Profit 399000 216600 615600 207000 258700 149900 Part 2: Floor cleaner Table Stain remover Table Polish Total | 570000 285000 285000 25 19000 114001 11400 25 Ounces Yield / ounces per bottle No of bottles Price per bottle TOTAL REVENUE Less : Cost of production Additional Processing cost=258700+104000 Total weekly Gross Profit 399000 171000 171000 741000 207000 362700 171300 Part 3: Management made wrong decision by choosing to not process table cleaner further. (as Gross profit under further processing is more)