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Mnenie [13.5K]
2 years ago
10

Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Info

rmation concerning the purchase and use of Echol follows:
Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $115 per container. A discount of 2% 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 $130 for an average shipment of 100 15-gallon containers of Echol.

Use of Echol The bill of materials calls for 7.6 quarts of Echol per bottle of cleaning solvent. (Each gallon contains four quarts.) About 5% of all Echol used is lost through spillage or evaporation. In addition, statistical analysis has shown that every 41st bottle is rejected at final inspection because of contamination.

Required:
a. Compute the standard purchase price for one quart of Echol.
b. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.
c. Using the data from (1) and (2) above, prepare a standard cost card showing the standard cost of Echol per bottle of cleaning solvent.
Business
1 answer:
s2008m [1.1K]2 years ago
4 0

Answer: a. $1.90

b. 8.2 quarts

c. $15.58

Explanation:

a. Compute the standard purchase price for one quart of Echol.

Cost per 15 gallon container = $115

Less: Cash discount= 2% × $115 = $2.30

Net cost = $115 - $2.30 = $112.70

Add: Shipping cost = $139/100 = $1.30

Total cost = $112.70 + $1.30 = $114

Number of quarts per container = (15 × 4) = 60

Standard cost per quart = $114/60 = $1.90

b. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.

Content per bill of materials = 7.6 quart

Add: Allowance for evaporation and spillage = 8.0 - 7.6 = 0.4 quart

Add: Allowance for rejected unit = 8.0/40 = 0.2 quarts

Standard quantity of Echol per salable bottle of cleaning solvent = 7.6 + 0.4 + 0.2 = 8.2 quarts

c. Using the data from (1) and (2) above, prepare a standard cost card showing the standard cost of Echol per bottle of cleaning solvent.

This will be:

= 8.2 quart × $1.90 per quart

= $15.58

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Implementation of Idea (DO)

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The Company has completed the first phase and is recommended to complete the second one which is that the company must do whatever it has planned for the better future of company.

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3 years ago
On August 1, 1958, first-class postage for a 1-ounce envelope was 4 cents. On August 1, 2007, a first-class stamp for the same e
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4.86%

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Given that,

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2 years ago
A foreign company (whose sales will not affect cornish's market) offers to buy 3,000 units at $17.00 per unit. in addition to va
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Trescott company had the following results of operations for the past year:

Sales (20,000 units at $22) $440,000

Direct materials and direct labor $200,000

Overhead (40% variable) 100,000

Selling and Administrative expenses (all fixed) 92,000 (392,000)

Operating income $ 48,000

A foreign company (whose sales will not affect Trescott's market) offers to buy 3,000 units at $17.00 per unit. In addition to the variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Trescott accepts the offer, its profits will increase (decrease) by:

Answer : If Cornish accepts this order, its profits will increase by $13,500.

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Direct Material and labor per unit = Total Direct Material and labor / No. of units sold

Direct Material and labor per unit =200000/20000 = $10

Variable Overhead per unit = Total Variable Overhead / No. of units sold

Variable Overhead per unit = (100000*0.4)/20000 = $2

Variable Cost per unit = $12 (Direct Material and labor per unit + Variable Overhead per unit)

Selling price of new order = $17 per unit

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Increase in Fixed Costs = Inc in fixed overhead + inc in S&A Expenses

Increase in Fixed Costs = $1500 (500 + 1000)

Total Cost of new order = (Variable Cost per unit * No. of units) + Increased Fixed Cost

Total Cost of new order = (12*3000) + 1500 = $37,500

Total Revenues from new order = Selling price per unit * No. of units sold

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Profit from new order = Total Revenues from new order - Total Cost of new order

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