I am stuck on the standard quantity in quarts. Martin Company manufactures a pow

Question

I am stuck on the standard quantity in quarts.

Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information concerning the purchase and use of Echol follows:

Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $123 per container. A discount of 1% is offered by the supplier for payment within 10 days, and Martin Company takes all discounts. Shipping costs, which Martin Company must pay, amount to $136 for an average shipment of 100 15-gallon containers of Echol.

Use of Echol The bill of materials calls for 7 quarts of Echol per bottle of cleaning solvent. (Each gallon contains four quarts.) About 8% of all Echol used is lost through spillage or evaporation (the 7 quarts above is the actual content per bottle). In addition, statistical analysis has shown that every 41st bottle is rejected at final inspection because of contamination.

Compute the standard purchase price for one quart of Echol. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent. (Round your answer to 2 decimal places.)

Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information concerning the purchase and use of Echol follows:

Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $123 per container. A discount of 1% is offered by the supplier for payment within 10 days, and Martin Company takes all discounts. Shipping costs, which Martin Company must pay, amount to $136 for an average shipment of 100 15-gallon containers of Echol.

Use of Echol The bill of materials calls for 7 quarts of Echol per bottle of cleaning solvent. (Each gallon contains four quarts.) About 8% of all Echol used is lost through spillage or evaporation (the 7 quarts above is the actual content per bottle). In addition, statistical analysis has shown that every 41st bottle is rejected at final inspection because of contamination.

Explanation / Answer

Requirement 1)

Cost Per Container ($123) - Discount ($123*1% = $1.23) = $121.77 + Shipping ($136/100 gallons = $1.36) = $123.13

There is 15 gallons in the container and 4 quarts in each gallon (15*4 = 60)

123.13/60 = 2.05 per quarter

Requirement 2)

Amount of materials (7qts)

+ allowance for spllage (7/.92 = 7.6087 - 7.6087 = .6087)

----------------------

= 7.6087

+ allowance for rejecs (7.6087/40bottles = 0.1902)

------------------

7.6087 + 0.1902 = 7.80

Requirement 3)

Standard Quantity (7.80) x Standard Price ($2.05) = $15.99

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