Iron Man Cleaning Company 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 per kilogram to make and sells for $4 per kilogram. A small portion of the annual production of this product is retained for further processing in the Mixing Department; there, it is combined with several other ingredients to form a paste, which is marketed as a silver polish selling for $8 per jar. This further processing requires 0.25 kilogram of Grit 337 per jar. Costs of other ingredients, labour, and variable overhead associated with this further processing amount to $5 per jar. Variable selling costs are $0.60 per jar. If the decision were made to cease production of the silver polish, $1 200 of the Mixing Department’s fixed costs could be avoided. Hercules 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 be sold to justify the further processing of Grit 337.
(CMA, adapted)
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