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# Walters Company: incremental monthly revenue, accounting for joint costs

This problem is titled Processing Further. # 2

Walters Company is considering producing 120,000 pounds of paperclips and 140,000 pounds of staples each month from their current production of grade A and Grade B wiring. The following are the expenditures to date:
Jan 1 \$100,000 Bulk steel purchase

Jan 2 - Feb 15 \$150,000 Cost to melt steel

Feb 16 - Mar 31 \$200,000 Cost to mold steel into wires, polish wires
And wrap around large bolts.

April 1 \$3.00/pound Market price for grade A wire
\$4.00/pound market price for grade B wire.

Grade A wire requires \$450,000 of monthly variable costs to process into staples, which can be sold in the market on 5/1/xxxx for \$7.00. Grade B wire requires \$600,000 of monthly variable costs to process into paperclips, which can be sold in the market on 5/1/xxxx for \$8.00 per pound.

Required:
1. Should Walters Company sell their products in the marketplace on April 1 or on May
What recommendation would you make to Walters Company?

2. What is the incremental monthly revenue (loss) for staples and paperclips?

3. How should the \$450,000 of joint costs be accounted for in the further processing descision?

I will need the formula that is used and the mathematical calculations shown completely.

#### Solution Summary

In the solution each question is answered complete with formulas and calculations, as needed.

\$2.19