Joint Products: Relevant Costs: Cost-Volume-Profit
Zytel Corporation produces cleaning compound, and solutions for industrial and household use. While must of its product are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $1.60 a pound to make and sells for $2.00 a pound. A small portion of the annual production of this product is retained for the 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 $4.00 per jar. This further processing required 1/4 pound of Grit 337 per jar. Costs of other ingredients, labor, and variable overhead associated with this further processing amount to $2.50 per jar. Variable selling costs are $.30 per jar. If the decision were made to cease production of the silver polish. $5,600 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.
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