Question

Swedish pharmaceutical company Davos Pharmacia makes an anticoagulant drug. The main ingredient in the drug is a raw material called Alpha SR40. Information concerning the purchase and use of Alpha SR40 follows: Purchase of Alpha SR40: The raw material Alpha SR40 is purchased in 2-kilogram containers at a cost of 3,000 Kr per kilogram. (The Swedish currency is the krona, which is abbreviated as Kr.) A discount of 2% is offered by the supplier for payment within 10 days, and Davos Pharmacia takes all discounts. Shipping costs, which Davos Pharmacia must pay, amount to 1,000 Kr for an average shipment of ten 2-kilogram containers. Use of Alpha SR40: The bill of materials calls for 6 grams of Alpha SR40 per capsule of the anticoagulant drug. (A kilogram equals 1,000 grams.) About 4% of all Alpha SR40 purchased is rejected as unsuitable and is not used to make the anticoagulant drug. Thus, on average the 6 grams of suitable Alpha SR40 required for each capsule rep- resents 96% of the amount that initially goes into production.
Required:
1. Compute the standard purchase price for one gram of Alpha SR40.
2. Compute the standard quantity of Alpha SR40 (in grams) per capsule that passes final inspection. (Carry computations to two decimal places.)
3. Using the data from (1) and (2) above, prepare a standard cost card showing the standard cost of Alpha SR40 per capsule of the anticoagulant drug.


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  • CreatedJuly 08, 2015
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