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Problem 1 (Setting the Standard): Mandaluyong Company manufactures perfumes and one of its bestselling products is the Rose fragrance. The main ingredient in the perfume
Problem 1 (Setting the Standard): Mandaluyong Company manufactures perfumes and one of its bestselling products is the Rose fragrance. The main ingredient in the perfume is rose oil. Information concerning the purchase and use of rose oil follows: Purchase of rose oil - Rose oil is purchased in 20-gallon containers at a cost of P120 per container. Mandaluyong's supplier of rose oil give trade discount of bulk discount for a minimum purchase of 100 gallons. Also, a discount of 5% is offered by the supplier for payment within 10 days, and Mandaluyong Company takes all the discounts. Shipping costs, which Mandaluyong Company must pay, amount to P150 for an average shipment of 100 20-gallon containers of Rose oil and receiving costs for inspections and other activities is expected to be at P2 per gallon. Use of Rose Oil The bill of materials calls for 9.5 quarts of Rose oil per bottle of the perfume (each gallon contains four quarts). About 5% of all rose oil used is lost through evaporation during the boiling process (the 9.5 quarts above is the actual content per bottle). In addition, statistical analysis has shown that every 21st bottle is rejected at final inspection because of contamination. Required: 1. Compute the standard purchase price for one quart of Rose oil. 2. Compute the standard quantity of Rose oil in quarts) per salable bottle of perfume
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