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 $3.20 a pound to make and sells for $4.00 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 $8.00 per jar. This further processing requires ¼ pound of Grit 337 per jar. Costs of other ingredients, labor, and variable overhead associated with this further processing amount to $5.00 per jar. Variable selling costs are $.60 per jar. If the decision were made to cease production of the silver polish, $11,200 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.



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  • CreatedApril 22, 2014
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