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E10.21 Determining standard material cost: manufacturer

Tahmar Valley Chemical Company manufactures industrial chemicals. The company plans to introduce a new chemical solution and needs to develop a standard product cost. The new chemical solution is made by combining a chemical compound (nyclyn) with a solution (salex), heating the mixture to boiling point, adding a second compound (protet), and bottling the resulting solution in 10­litre containers. The initial mix, which is 11 litres in volume, consists of 12 kilograms of nyclyn and 9.6 litres of salex. A 1­litre reduction in volume occurs during the boiling process. The solution is cooled slightly before 5 kilograms of protet are added. The protet evaporates, so it does not affect the total liquid volume. The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows:

Nyclyn                                  $2.90 per kilogram

Salex                                     $3.60 per litre

Protet                                  $4.80 per kilogram

 

Nyclyn +Salex                                    (boiling point) + Protet (evaporate)                             Bottling

12 kg + 10kg      (11        10Li )                    5kg                                                                                        10Li

 

Required:

Determine the standard material cost of a 10 litre container of the new product.

 

 

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