Lakeway Manufacturing Co. manufactures and sells household cleaning products. The company's research department has developed a new
Question:
Lakeway Manufacturing Co. manufactures and sells household cleaning products. The company's research department has developed a new cleaner for which a standard cost must be determined. The new cleaner is made by mixing 7 quarts of triphate solution and 5 pounds of sobase granules and boiling the mixture for several minutes. After the solution has cooled, 4 ounces of methado are added. This "recipe" makes 6 quarts of the cleaner, which is then packaged in 1 quart plastic dispenser bottles. Raw material costs are as follows:
trifate solution | ps | 0.28 | per room |
sobase granules | 0.84 | per pound | |
Metagram | 1.06 | per ounce | |
Bottle | 0.17 | each | |
Required:
a. Using the above data, calculate the raw material cost for one bottle of the new cleaner
b. Assume that the above costs are the current best estimates of the costs at which the required quantities of the raw material can be purchased. What other factors would you recommend considering when establishing the standard raw material cost for the new cleaner?
Accounting What the Numbers Mean
ISBN: 978-0078025297
10th edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele