**PLEASE PROVIDE THE ANSWERS FOR EACH PART OF THE QUESTION IN A CHART AND NUMBER
ID: 2585705 • Letter: #
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**PLEASE PROVIDE THE ANSWERS FOR EACH PART OF THE QUESTION IN A CHART AND NUMBER THE ANSWERS. PLEASE CHECK THE NUMBERS. PROVIDE EXPLANATION; IF POSSIBLE.**
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company's Grit 337 and its Sparkde silver polish Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $7.00 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $5.00 per jar This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct costs involved in the processing of a jar of silver polish are Other ingredients Direct labor 0.65 1.48 S 2.13 Total direct cost Overhead costs associated with processing the silver polish are Variable manufacturing overhead cost Fixed manufacturing overhead cost (per month) Production supervisor Dapreciation of mbking equipment 25% of direct labor cost 5 3,400 5 1,400 The production supervisor has no duties other than to oversee production of the silver polish. The mbing equipment is special-purpose equipment acquired specifically to produce the silver polish. Its resale value is negligible and it does not wear out through use Direct labor is a variable cost at Come-Clean Corporation. Advertising costs for the silver polish total $1,600 per month. Variable selling costs assoclated with the silver polish are 5% of sales Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder Required: 1. What is the incremental contribution margin per jar from further processing of Grit 337 into silver polish? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Explanation / Answer
Come-Clean Corporation
Product 1 - Grit 337
Product 2 - Sparlde Silver Polish (here after referred as "SSP")
Description
Cost
Grit 337 / Pound - A (Given)
$1.60
SSP / Jar
Material Costs / Jar - B
$0.40
(1/4th Pound of Grit 337 is required - A)
($ 1.60 * 25%)
Other Ingredients Costs / Jar - C (Given)
$0.65
Direct Labour Costs / Jar - D (Given)
$1.48
Variable Overheads / Jar - E
(25% of Direct Labour Costs - D)
($ 1.48 * 25%)
$0.37
Direct Costs / Jar - F (B + C + D + E)
$2.90
Variable Selling Cost / Jar - G
(5% of Sales - $ 5.00 * 5%)
$0.25
Total Direct Costs / Jar - H (F + G)
$3.15
Selling Price / Jar
$5.00
Incremental Contribution Margin / Jar
(Selling Price - Total Direct Costs)
($ 5.00 - $ 3.15)
$1.85
1. What is the incremental Contribution Margin per jar from further processing of Grit 337 into SSP?
Ans: Incremental Contribution Margin $ 1.85 per Jar
Note: Variable Selling Costs are also considered for arriving at incremental contribution margin
Fixed Overhead Costs / month
Amount
Production Supervisor
$3,400.00
Depreciation on mixing equipment
$1,400.00
Fixed Advertising Costs
$1,600.00
Total Fixed Overhead Costs / month
$6,400.00
Incremental Contribution Margin / Jar
$1.85
Minimum Units to be sold
(Total Fixed Overheads / Incremental Contribution Margin per Jar - $ 6,400 / $ 1.85)
(rounded off to nearest integer as number of units cannot be in decimals)
3,459
Note: Total Cost of Production Supervisor and Depreciation mixing equipment are considered in fixed costs as the production supervisor is exclusively for this process and mixing equipment is also used only for this process.
2. What is the minimum number of jars of SSP that must be sold each month to justify the continued processing of Grit 337 into SSP?
Ans: Number of Jars - 3,459
Description
Cost
Grit 337 / Pound - A (Given)
$1.60
SSP / Jar
Material Costs / Jar - B
$0.40
(1/4th Pound of Grit 337 is required - A)
($ 1.60 * 25%)
Other Ingredients Costs / Jar - C (Given)
$0.65
Direct Labour Costs / Jar - D (Given)
$1.48
Variable Overheads / Jar - E
(25% of Direct Labour Costs - D)
($ 1.48 * 25%)
$0.37
Direct Costs / Jar - F (B + C + D + E)
$2.90
Variable Selling Cost / Jar - G
(5% of Sales - $ 5.00 * 5%)
$0.25
Total Direct Costs / Jar - H (F + G)
$3.15
Selling Price / Jar
$5.00
Incremental Contribution Margin / Jar
(Selling Price - Total Direct Costs)
($ 5.00 - $ 3.15)
$1.85
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