X CO produces a 16 ounce can of BR at a cost of $1.80 to make and sells for $3.00. 16 ounces of BR can be further refined into 4 small tins of CP. The chrome polish sells for $5.00 per tin.

Variable Production Cost to convert to chrome polish

Materials $1.65 per tin

Direct Labor $1.20 per tin

Variable O/H 25% of DL$

Fixed Production Cost of chrome polish

Fixed Supervision $2,500 per month

Equipment Depreciation $1,200 per month

Selling Cost of chrome polish

Advertising $4,000 per month

Commissions 8% of revenue

All equipment has no resale value and can only be used for the CP. The supervisor is specific to the CP product and would be terminated if the polish is no longer made. The company normally allows 40,000 ounces of bug remover to be processed into CP per month. Is making the CP a financially good decision? Why or why not. What are the non-financial reasons why X CO. should or should not make the polish. Explain the specific items that might be in X CO.'s overhead and how the 25% of DL$ would have been computed.