Solution

Profit when table cleaner is not processed further

No of bottles - Floor cleaner 20,000

Price per bootle - Floor cleaner $ 20.00
Total revenue -Floor cleaner

No of bottles - Table cleaner 12,000

Price per bootle - Table cleaner $ 17.00
Total revenue - Table cleaner
TOTAL REVENUE
Less
Cost of production
Additional Processing cost
Gross Profit

Profit when table cleaner is processed further

No of bottles - Floor cleaner 20,000.00

Price per bootle - Floor cleaner $20.00
Total revenue -Floor cleaner

No of bottles - Table Stain remover 12,000.00

Price per bootle - Table Stain remover $14.00
Total revenue - Table Stain remover

No of bottles - Table polish 12,000.00

Price per bootle - Table polish $14.00
Total revenue - Table polish

TOTAL REVENUE
Less
Cost of production
Additional Processing cost
Additonal cost for further processing
Gross Profit

Incremental earnngs as a result of further processing

Profit when table cleaner is processed further
Profit when table cleaner is not processed further
Decision
Processing results into a $32,000 increase in net income, hence the decision by management not to process further is not a wi

Incremental Analysis

Particulars Table cleaner is not processed further

Incremental Revenue $ 204,000

Incremental cost $ -
Net Income $ 204,000

Using Incremental analysis, the table cleaner should be processed further

e cleaner is not processed further

$ 400,000

$ 204,000
$ 604,000

$ 450,000
$ -
$ 154,000

ble cleaner is processed further

$ 400,000

$ 168,000

$ 168,000

$ 736,000

$ 450,000
$ 100,000
$ -
$ 186,000

$ 186,000
$ 154,000
$ 32,000
ement not to process further is not a wise decision.

Net Income
Table cleaner is processed further Increase/Decrease

$ 336,000 $ 132,000
$ (100,000) $ (100,000)
$ 236,000 $ 32,000