Svenska Pharmicia, a Swedish pharmaceutical company, 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: 1.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.) 2. A discount of 2% is offered by the supplier for payment within 10 days and Svenska Pharmicia takes all discounts. 3.Shipping costs, which Svenska Pharmicia 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 before being used to make the anticoagulant drug. In addition, after the addition of Alpha SR40, about 1 out of every 26 capsules is rejected at final inspection, due to defects of one sort or another in the capsule. 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.
Svenska Pharmicia, a Swedish pharmaceutical company, 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: 1.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.) 2. A discount of 2% is offered by the supplier for payment within 10 days and Svenska Pharmicia takes all discounts. 3.Shipping costs, which Svenska Pharmicia 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 before being used to make the anticoagulant drug. In addition, after the addition of Alpha SR40, about 1 out of every 26 capsules is rejected at final inspection, due to defects of one sort or another in the capsule. 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.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:EXERCISE 10-1 Setting Standards; Preparing a Standard Cost Card
Svenska Pharmicia, a Swedish pharmaceutical company, 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: 1.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.) 2. A discount of 2% is offered by the supplier for payment within 10 days
and Svenska Pharmicia takes all discounts. 3.Shipping costs, which Svenska Pharmicia 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 before being used to make the anticoagulant drug. In addition, after the
addition of Alpha SR40, about 1 out of every 26 capsules is rejected at final inspection, due to
defects of one sort or another in the capsule.
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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