Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a rawmaterial called Echol. Information concerning the purchase and use of Echol follows:Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $115 per container. A discount of2% is offered by the supplier for payment within 10 days, and Martin Company takes all discounts. Shipping costs, which Martin Company must pay, amount to $130 for an average shipment of 100 15-galloncontainers of Echol.Use of Echol The bill of materials calls for 7.6 quarts of Echol per bottle of cleaning solvent. (Each galloncontains four quarts.) About 5% of all Echol used is lost through spillage or evaporation (the 7.6 quartsabove is the actual content per bottle). In addition, statistical analysis has shown that every 41st bottle isrejected at final inspection because of contamination.Required:1. Compute the standard purchase price for one quart of Echol.2. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.3. Using the data from (1) and (2) above, prepare a standard cost card showing the standard cost of Echolper bottle of cleaning solvent.
Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw
material called Echol. Information concerning the purchase and use of Echol follows:
Purchase of Echol Echol is purchased in 15-gallon containers at a cost of $115 per container. A discount of
2% is offered by the supplier for payment within 10 days, and Martin Company takes all discounts. Shipping costs, which Martin Company must pay, amount to $130 for an average shipment of 100 15-gallon
containers of Echol.
Use of Echol The bill of materials calls for 7.6 quarts of Echol per bottle of cleaning solvent. (Each gallon
contains four quarts.) About 5% of all Echol used is lost through spillage or evaporation (the 7.6 quarts
above is the actual content per bottle). In addition, statistical analysis has shown that every 41st bottle is
rejected at final inspection because of contamination.
Required:
1. Compute the standard purchase price for one quart of Echol.
2. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.
3. Using the data from (1) and (2) above, prepare a
per bottle of cleaning solvent.
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