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