Zytel Corporation produces cleaning compounds and solutions for industrial and h

Question

Zytel Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $2.60 a pound to make and sells for $3.80 a pound. A small portion of the annual production of this product is retained for 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 $5.70 per jar. This further processing requires 1/4 pound of Grit 337 per jar. Costs of other ingredients, labor, and variable overhead associated with this further processing amount to $2.40 per jar. Variable selling costs are $0.20 per jar. If the decision were made to cease production of the silver polish, $9,900 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 (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Minimum number of jars

Explanation / Answer

Number of Jars to be sold: Selling price per jar 5.70 Less: Seling price of 1/4the Pound 0.95 Incremental revenue per Jar 4.75 Less: Incremental cost Labour cost 2.40 Selling cost 0.20 Incremental income 2.15 Avoidable Fixed cost 9900.00 Number of Jars to be sold: 4605.00 Minimum Number of jars: 4605 per month

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