Question
Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information on the purchase and use
Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information on the purchase and use of Echol follows. Purchase of Echol: Echol is purchased in 30-litre containers at a cost of $130 per container. A discount of 3% 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 $200 for an average shipment of one hundred 30-litre containers of Echol. Use of Echol: The bill of materials calls for 15.2 litres of Echol per bottle of cleaning solvent. About 5% of all Echol used is lost through spillage or evaporation (the 15.2 litres 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.
Required: 1. Compute the standard purchase price for one litre of Echol. (Do not round intermediate calculations and round final answer to 2 decimal places.)
2. Compute the standard quantity of Echol (in litres) per saleable bottle of cleaning solvent. (Do not round intermediate calculations and round final answer to 2 decimal places.)
3. Using the data from parts (1) and (2), prepare a standard cost card showing the standard cost of Echol per bottle of cleaning solvent.
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