White, Inc. produces a chemical product whose primary component is purchased on credit and any discounts are always taken. The following material and labour elements make up the costs of the product: $$\begin{array} { l r }
\text { Purchase price for material } & \$ 30 \text { per litre } \
\text { Freight and handling } & \$ 130 \text { per } 100 \text { litres }
\end{array}$$ Each container of the chemical product contains 5.7 quarts of material. During the process 5% of the material is lost due to waste. Each container of product also requires 1.2 hours of labour. Each day 2 hours are taken for set-up, cleaning, and breaks. Also, the wage rate is $15 per hour and fringes/payroll taxes are 20% of wages. Clients can take a 3% discount if they pay invoices within 10 days; otherwise, the entire invoice amount is due within 30 days. 1 litre equals 4 quarts.
The standard quantity of material per finished unit is:
A) 6.0 quarts
B) 5.4 quarts
C) 5.7 quarts
D) 5.415 quarts

Question

White, Inc. produces a chemical product whose primary component is purchased on credit and any discounts are always taken. The following material and labour elements make up the costs of the product: $$\begin{array} { l r } 
\text { Purchase price for material } & \$ 30 \text { per litre } \
\text { Freight and handling } & \$ 130 \text { per } 100 \text { litres }
\end{array}$$ Each container of the chemical product contains 5.7 quarts of material. During the process 5% of the material is lost due to waste. Each container of product also requires 1.2 hours of labour. Each day 2 hours are taken for set-up, cleaning, and breaks. Also, the wage rate is $15 per hour and fringes/payroll taxes are 20% of wages. Clients can take a 3% discount if they pay invoices within 10 days; otherwise, the entire invoice amount is due within 30 days. 1 litre equals 4 quarts.
The standard quantity of material per finished unit is:
A) 6.0 quarts
B) 5.4 quarts
C) 5.7 quarts
D) 5.415 quarts

Quizplus · Accepted Answer

The standard quantity of material per finished unit accounts for the initial amount needed (5.7 quarts) and the 5% waste. Since 1 litre equals 4 quarts, 5.7 quarts is 1.425 litres. Accounting for a 5% loss, the calculation is 1.425 / (1 - 0.05) = 1.5 litres, which equals 6 quarts.

White, Inc Each Container of the Chemical Product Contains 5