Reference no: EM132488757

Question 1: What would the incremental cost and net income increase (decrease) be if the table cleaner was processed further.

Point 1: Indigo 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, 891,000 ounces of chemical input are processed at a cost of $212,400 into 594,000 ounces of floor cleaner and 297,000 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 $241,800.

Point 2: FloorShine sells at $21 per 30-ounce bottle. The table cleaner can be sold for $20 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 297,000 ounces of another compound (TCP) to the 297,000 ounces of table cleaner. This joint process will yield 297,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $109,000. Both table products can be sold for $15 per 25-ounce bottle.

1. If table cleaner is not processed further, it is allocated 1/3 of the $212,400 of CDG cost, which is equal to 1/3 of the total physical output.
2. If table cleaner is processed further, total physical output is 1,188,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.