I don\'t get how to even start this question. Juarez Corporation produces cleani

Question

I don't get how to even start this question.

Juarez 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 S2.00 a pound to make and sells for $3.20 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 $4.70 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 $2.50 per jar. Variable selling costs are SO.30 per jar. If the decision were made to cease production of the silver polish, $8,200 of Mixing Department fixed costs could be avoided. Juarez 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.)

Explanation / Answer

Answer: Calculate the minimum number of jars of silver polish that would have to be sold to justify further processing of Grit 337:

Break even point=8200/1.1=7454.55 units

The minimum no of jars is 7454.55

Sales revenue for one jar of silver polish 4.7 Sales revenue for 1/4 pound of Grit 337 0.8 Incremental revenue from further processing 3.9 Incremental costs of further processing: Processing costs 2.5 Selling costs 0.3 2.8 Contribution margin 1.1

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.