Business Finance
Accounting Problems chapt 7

Question Description

I don’t understand this Accounting question and need help to study.

Sutton Industrial Products Inc.docx 

Unformatted Attachment Preview

Sutton Industrial Products Inc. (SIPI) is a diversified industrial-cleaner processing company. The company’s Verde plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week 924,300 ounces of chemical input are processed at a cost of $210,900 into 616,200 ounces of floor cleaner and 308,100 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 $245,555. FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $30 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 308,100 ounces of another compound (TCP) to the 308,100 ounces of table cleaner. This joint process will yield 308,100 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $100,900. Both table products can be sold for $22 per 25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on the following analysis. Process Further Production in ounces Revenue Costs: CDG costs TCP costs Total costs Weekly gross profit Table Cleaner 308,100 Table Stain Remover (TSR) 308,100 $369,720 $271,128 70,300 * 0 Table Polish (TP) 308,100 Total $271,128 $542,256 52,725 50,450 52,725 50,450 70,300 103,175 103,175 $299,420 $167,953 105,450 ** 100,900 206,350 $167,953 $335,906 *If table cleaner is not processed further, it is allocated 1/3 of the $210,900 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,232,400 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 $ (2) Calculate the company’s total weekly gross profit assuming the table cleaner is processed further. Total weekly gross profit $ (3) Compare the resulting net incomes and comment on management’s decision. Management made the decision by choosing to not process table cleaner further. ...
Student has agreed that all tutoring, explanations, and answers provided by the tutor will be used to help in the learning process and in accordance with Studypool's honor code & terms of service.

This question has not been answered.

Create a free account to get help with this and any other question!