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Sulu
800,000
455,000
80,000
250,000
Instructions
a. Determine whether each of the three joint products should be
sold as is, or processed further.
P7-3A
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, 900,000 ounces of chemical input
are processed at a cost of $210,000 into 600,000 ounces of floor cleaner
and 300,000 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 $240,000.
Floor Shine sells at $20 per 30-ounce bottle. The table cleaner can be
sold for $17 per 25-ounce bottle. However, the table cleaner can be
converted into two other products by adding 300,000 ounces of another
compound (TCP) to the 300,000 ounces of table cleaner. This joint
process will yield 300,000 ounces each of table stain remover (TSR) and
table polish (TP). The additional processing costs for this process
amount to $100,000. Both table products can be sold for $14 per 25-
ounce bottle.
The company decided not to process the table cleaner into TSR and TP
based on the following analysis.