Old MacDonald's Pharm (OMP) purchases 3 chemicals which are then processed to produce 2 types of powders
Question:
Old MacDonald's Pharm (OMP) purchases 3 chemicals which are then processed to produce 2 types of powders (Talc and Noop) that are used as ingredients for active drugs. The chemicals are blended for 4 hours and heated for 20 minutes. The results are 2 powders, Talc and Noop.
For every 1,100 kilograms of chemicals used, 500 kilograms of Talc and 500 kilograms of Noop are created. Talc and Noop can be sold to external customers: $10 per kilogram for Talc and $25 per kilogram for Noop. The cost to produce 500 kilograms of either Talc and Noop are as follows:
- Chemicals - $5,500
- Direct labour - $4,500
- Overhead - $3,500
Talc and Noop are packaged in 25 kilogram bags and shipped. The cost of each bag is $0.75. Shipping costs are $0.10 per kilogram.
OMP can also process Talc further by heating it up and moulding it into a gel. The gel can be sold directly to drugstores as a pain reliever. If this route is taken, the revenue received per bottle of gel would be $3.00, with 5 bottles produced for every kilogram of Talc. The costs of heating and moulding are $2.50 per kilogram of Talc. Bottles cost $0.20 each and bottles are shipped in boxes of 25 at a shipping cost of $1.23 per box.
Required. Assume that OMP decided to process the Talc into a gel. Calculate the net inflows or outflows for 500 kilograms of Talc if OMP decides to process it further. Enter 0 if something should be not be included. Do not use + and - signs. Note outflows by putting an O in the right column, inflows by putting an I in the right column, and NA if it is neither. Do not use $ signs in your final answers.
Process the Talc Further
| Cost | Total for Three Years (Do not use + or - signs or indicate whether a positive or negative (with brackets) - indicate inflow or outflow in the column to the right) | I / O (Enter the letter only - I (for Igloo) for inflow, O (for Olive) for outflow) |
| Incremental Revenues | $ | |
| Bags | $ | |
| Shipping | $ | |
| Heating/Moulding | $ | |
| Bottles | $ |
Expert Answer:
Ans Revenue per kilogram of gel Revenue from sale of bottle 53 per kilogram 15 Cost per kilogram ... View the full answer
