Question

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, 895,500 ounces of chemical Input are processed at a cost of $210,900 into 597,000 ounces of floor cleaner and 298,500 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name Floor Shine. The additional processing costs for this conversion amount to $248,100. Floor Shine sells at 519 per 30-ounce bottle. The table deaner can be sold for $20 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 298.500 Ounces of another compound (TCP) to the 298,500 ounces of table cleaner. This joint process will yield 298,500 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $107,000. 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 Total Table Stain Remover (TSR) 298,500 $179,100 Table Cleaner 299,500 $238,800 Table Polish (TP) 298,500 $179,100 Production in ounces Revenues $358,200 70,300 Costs CDG costs TCP costs Total costs Weekly gross pront 52,725 53,500 106,225 52,725 53,500 105.225 105,450 ** 107,000 212.450 70,300 $165,500 $72,875 $22.525 $145.750 *If table cleaner is not processed further, it is allocated 1/3 of the 5210,900 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,104,000 ounces TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG est,

Answer 1

Allocated cost is irrelevant since already incurred
1.Weekly gross profit = 238,800 - 0 = $238,800
2.If processed further = 358,200-107,000 = $251,200
Made wrong decision
	Don’t Process	Process	Net Income Increase
Incremental Revenue	238,800	358,200	119,400
Incremental costs	-	107,000	(107,000)
Totals	238,800	251,200	12,400

Should process further