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