Question

Come-Clean Corporation produces a variety of dleaning compounds and solutions for both industrial and household use. While most of its products are processed indepondently, a few are related, such as the company's Grit 337 and its Sparkle silver polish. Grit 337 is a coarse dleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $6.40 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $5.00 per jar This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct costs involved in the processing of a jar of silver polish are: Other ingredients Direct labor 0.65 1.44 Total direct cost $2.09 Overhead costs associated with processing the silver polish are: Variable manufacturing overhead cost Fixed manufacturing overhead cost (per month): 25% of direct labor cost Production supervisor Depreciation of mixing equipment $ 3,200 $ 1,400 The production supervisor has no duties other than to oversee production equipment is negligible and it does not wear out through use. of the sliver polish. The mixing special-purpose equipment acquired specifically to produce the silver polish. Its resale value is Direct labor is a variable cost at Come-Clean Corporation Advertising costs for the silver polish total $3,800 per month. Variable selling costs associated with the silver polish are 5% of sales. Due to a recent decline in the demand for s lver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder Required: 1. What is the incremental contribution margin per jar from further processing of Grit 337 into (Do not round intermediate calculations. Round your answer to 2 decimal places) Incremental contribution margin jar

Answer 1