Lecture 11 Lecture Illustration

Lecture 11 Lecture Illustration - further processing in the...

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Week 11 Lecture Illustration questions: Example 1 - Drop product line: retailer Murray Street Deli's owner is disturbed by the poor profit performance of his ice-cream counter and is considering discontinuing it. He has prepared the following profit analysis: Required: 1. Evaluate the above analysis that has been prepared by the manager. 2. Provide a correct analysis and assess whether or not the ice-cream counter should be continued. Example 2 - Further processing: manufacturer Hercules Cleaning Company 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 $1.60 per kilogram to make and sells for $2 per kilogram. A small portion of the annual production of this product is retained for
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Unformatted text preview: further processing in the Mixing Department; there, it is combined with several other ingredients to form a paste, which is marketed as a silver polish selling for $4 per jar. This further processing requires 0.25 kilogram of Grit 337 per jar. Costs of other ingredients, labour, and variable overhead associated with this further processing amount to $2.50 per jar. Variable selling costs are $0.30 per jar. If the decision were made to cease production of the silver polish, $5600 of the Mixing Department's fixed costs could be avoided. Hercules 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 the further processing of Grit 337....
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