Thompson Industrial Products Inc. (TIPI) is a diversified industrial-cleaner processing company. The company’s Dargan pl

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Thompson Industrial Products Inc. (TIPI) is a diversified
industrial-cleaner processing company. The company’s Dargan plant
produces two products: a table cleaner and a floor cleaner from a
common set of chemical inputs (CDG). Each
week, 855,000 ounces of chemical input are processed at a
cost of $207,000 into 570,000 ounces of floor
cleaner and 285,000 ounces of table cleaner. The floor
cleaner has no market value until it is converted into a polish
with the trade name FloorShine. The additional processing costs for
this conversion amount to $240,000.

FloorShine sells at $18 per 30-ounce bottle. The table cleaner
can be sold for $17 per 25-ounce bottle. However, the table
cleaner can be converted into two other products by
adding 285,000 ounces of another compound (TCP) to
the 285,000 ounces of table cleaner. This joint process
will yield 285,000 ounces each of table stain remover
(TSR) and table polish (TP). The additional processing costs for
this process amount to $100,000. Both table products can be sold
for $14 per 25-ounce bottle.

The company decided not to process the table cleaner into TSR and
TP based on the following analysis.
*If table cleaner is not processed further, it is allocated 1/3 of
the $207,000 of CDG cost, which is equal to 1/3 of the total
physical output.
**If table cleaner is processed further, total physical output
is 1,140,000 ounces. TSR and TP combined account for 50%
of the total physical output and are each allocated 25% of the CDG
cost.
Determine if management made the correct decision to not process
the table cleaner further by doing the following.

(1) Calculate the company’s total weekly gross profit assuming the
table cleaner is not processed further.
(2) Calculate the company’s total weekly gross profit assuming the
table cleaner is processed further.
(3) Compare the resulting net incomes and comment on management’s
decision. Right or wrong