A chemical company produces amongst its product range two industrial cleaning fluids A and B. These products are manufactured jointly. In 19X9 total sales are expected to be restricted because home trade outlets for fluid Bare limited to 54000 gals for the year. At this level, plant capacity will be underutilised by 25 per cent.

REQUIRED From the information given below:

(a) draw a flow diagram of the operations

(b) calculate separately for fluids A and B for the year 19X9

(i) total manufacturing cost

(ii) manufacturing cost per gallon

(iii) list price per gallon

(iv) profit for the year

(c) calculate the break-even price per gal to manufacture an extra 3000 gals of fluid B for export, which would incur selling, distribution and administration costs of $1260

(d) state the price you would recommend the company should quote per gal for this export business, with a brief explanation for your decision The following data are given:
1 . Description of process Process 1 Raw materials L and M are mixed together and filtered There is an evaporation loss of 1 0 per cent 2 The mixture from process 1 is boiled, and this reduces the volume by 20 per cent The remaining liquid distils into 50 per cent extract A, 25 per cent extract B. and 25 per cent byproduct C 3 Two parts of extract A are blended with one part of raw material N, and one part of extract B with one part of raw material N, to form respectively fluids A and B 4 Fluid A is filled into 1-gallabelled bottles, and fluid B into 6-gal preprinted drums, and they are then both ready for sale 1 per cent wastage in labels occurs in this process 2. Cost Raw material Cost per gal $
L 0.20 M 0.50 N 2.00 Containers Cost $
1 -gal bottles 0.27 each 6-gal drums 5.80 Bottle labels, per 1 000 2.20 Direct wages Per gal of input Process processed $
1 0.11 2 0.15 3 0.20 4 0.30 Manufacturing overhead:
Fixed Variable, per gal of input Process per annum processed $ $
1 6000 0.04 2 20250 0.20 3 19500 0.10 4 14250 0.10 Process cost is apportioned entirely to the two main products on the basis of their output from each process.
No inventories of part-finished materials are held at any time.
Fluid A is sold through agents on the basis of list price less 20 per cent, and fluid Bat list price less 3:35-.
Of the net selling price, profit amounts to 8 per cent, selling and distribution costs to 12 per cent.
and administration costs to 50 per cent.
Taxation should be ignored