My company sells household cleaning products. The research department has develo

Question

My company sells household cleaning products. The research department has developed a new cleaner for which a standard cost must be determined. The new cleaner is made by mixing 18 quarts of triphate solution and 8 pounds of sobase granules and boiling the mixture for several minutes. After the solution has cooled, 4 ounces of methage are added. This recipe produces 15 quarts of the cleaner, which is then packaged in one-quart plastic dispenser bottles. The raw materials costs are:
Triphate solution $0.45 per quart
Sobase granules $0.90 per pound
Methage $1.40 per ounce
Bottle $0.25 each

Assume that the preceding costs are the current best estimated of the costs at which required quantities of the raw material can be purchased. Would you recommend that any other factors be considered in establishing the raw material cost standard for the new cleaner?

Explanation / Answer

So 15 Quart of cleaner requires :- 18Q of Triphate Soln = 18*$0.45 = $8.10 8Lb of Sobase = 8*$0.90 = $7.20 4 Oz of Methage = 4*$1.40 = $5.60 ----------------------------------------- Total Raw Mat cost for 15Q = $20.90 SO Per Q cost = $20.90/15 = $1.39 Add cost of 1 Bottle = $0.25 ------------------------------------- Cost per bottle = $1.64

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