Question

Graymont Industries purchases Solvate, a chemical compound used in several of its products, from ChemMaster. ChemMaster has just increased the list price of Solvate to $6.50 per gallon. However, because Graymont purchases a high volume of Solvate, ChemMaster grants the company a 10 percent discount off the list price. Charges for shipping Solvate from ChemMaster to Graymont's factory are $100 for a shipment of twenty-five 50-gallon drums. Special storage requirements cost $0.55 per gallon.Calculate Graymont's standard price for a gallon of Solvate. (Round answer to 2 decimal places, e.g. 3.51)

Answer 1

Answer:

Total inventory cost for a gallon: $ 6.48

Explanation:

discount over list price: 6.50 dollars less 10% = $ 5.85

gallons ordered: 25's 50-gallon drums:

25 x 50 = 1,250

purchase cost: 1,250 gallon x $ 5.85 = 7,312.5

shipment freight:                                       100    

Total:                                                         7,412.5

Gallon purchase cost: 7,412.5/ 1,250 = 5.93 per gallon

$ 5.93 + holding cost of $ 0.55 = $ 6.48