Carla Vista Industrial Products Inc. 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, 931,500 ounces of chemical input are processed at a cost of $207,300 into 621,000 ounces of floor cleaner and 310,500 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name FloorShine. The additional processing costs for this conversion amount to $257,400.FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $21 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 310,500 ounces of another compound (TCP) to the 310,500 ounces of table cleaner. This joint process will yield 310,500 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $106,000. 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 TableCleaner Table StainRemover (TSR) TablePolish (TP) Total Production in ounces 310,500 310,500 310,500 Revenues $260,820 $186,300 $186,300 $372,600 Costs: CDG costs 69,100* 51,825 51,825 103,650** TCP costs 0 53,000 53,000 106,000 Total costs 69,100 104,825 104,825 209,650 Weekly gross profit $191,720 $81,475 $81,475 $162,950 *If table cleaner is not processed further, it is allocated 1/3 of the $207,300 of CDG cost, which is equal to 1/3 of the total physical output.**If table cleaner is processed further, total physical output is 1,242,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.(a) 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 $enter total weekly gross profit in dollars (2) Calculate the company’s total weekly gross profit assuming the table cleaner is processed further.Total weekly gross profit $enter total weekly gross profit in dollars (3) Compare the resulting net incomes and comment on management’s decision.Management made the select a decision decision by choosing to not process table cleaner further.

1. The week gross profit is given as,

Answered: e cleaner. The floor cleaner has no…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Carla Vista Industrial Products Inc. 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, 931,500 ounces of chemical input are processed at a cost of $207,300 into 621,000 ounces of floor cleaner and 310,500 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name FloorShine. The additional processing costs for this conversion amount to $257,400.

FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $21 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 310,500 ounces of another compound (TCP) to the 310,500 ounces of table cleaner. This joint process will yield 310,500 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $106,000. 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
	Table Cleaner		Table Stain Remover (TSR)		Table Polish (TP)		Total
Production in ounces	310,500			310,500		310,500
Revenues	$260,820			$186,300		$186,300		$372,600
Costs:
CDG costs	69,100	^*		51,825		51,825		103,650	**
TCP costs	0			53,000		53,000		106,000
Total costs	69,100			104,825		104,825		209,650
Weekly gross profit	$191,720			$81,475		$81,475		$162,950

*If table cleaner is not processed further, it is allocated 1/3 of the $207,300 of CDG cost, which is equal to 1/3 of the total physical output.
**If table cleaner is processed further, total physical output is 1,242,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.

(a)

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

$enter total weekly gross profit in dollars

(2) Calculate the company’s total weekly gross profit assuming the table cleaner is processed further.

Total weekly gross profit

$enter total weekly gross profit in dollars

(3) Compare the resulting net incomes and comment on management’s decision.

Management made the select a decision decision by choosing to not process table cleaner further.

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