Question

Emrich Processing is a small custom stainless steel parts processor. Customers send new and used stainless steel parts to Emrich for cleaning in various acid baths to remove small imperfections or films on the surface. These parts are used in a variety of applications, ranging from nuclear reactors to chemical and medical applications. Depending on the foreign substance to be removed, Emrich chooses the acid bath mixture and process.
Such chemical cleaning operations require highly skilled technicians to handle the dangerous acids. Environmental Protection Agency (EPA) and Occupational Safety and Health Administration (OSHA) regulations are closely followed. Once the part is treated in the proper chemical bath using other chemicals, a benign waste solution results that can be disposed of via the city sewer system.
On May 12, Emrich ordered a 50- gallon drum of a specialty acid known as GX- 100 for use in a May 15 job. It used 25 of the 50 gallons in the drum. The 50 gallons cost $ 1,000. GX- 100 has a shelf life of 30 days after the drum is opened before it becomes unstable and must be discarded. Because of the hazardous nature of GX- 100 and the other chemicals Emrich uses, Emrich works closely with Environ Disposal, a company specializing in the disposal of hazardous wastes. At the time of order-ing the GX- 100, Emrich anticipated no other orders in the May– June time period that could use the remaining 25 gallons of GX- 100. Knowing it would have 25 gallons remaining, it built $ 1,000 into the cost of the job to cover the cost of the GX- 100 plus an additional $ 400 to cover the cost of having Environ dispose of the remaining 25 gallons.
On June 1, a customer called and asked for a price bid for a rush job to be completed on June 5. This job will use 25 gallons of GX- 100. Emrich is preparing to bid on this order. What cost amount for the GX- 100 must be considered in preparing the bid? Justify your answer.



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  • CreatedDecember 15, 2014
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