Reference no: EM133073980

Question - Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information on the purchase and use of Echol follows.

Purchase of Echol: Echol is purchased in EDI-litre containers at a cost of $160 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 $230 for an average shipment of one hundred 20-litre containers of Echol.

Use of Echol: The bill of materials calls for 16.80 litres of Echol per bottle of cleaning solvent About 4% of all Echol used is lost through spillage or evaporation [the 16.80 litres above is the actual'content per bottle}. In addition, statistical analysis has shown that every 41st bottle is rejected at ?nal inspection because of contamination.

Required -

1. Compute the standard purchase price for one litre of Echol.

2. Compute the standard quantity of Echol {in litres} per saleable bottle of cleaning solvent.

3. Using the data from parts (1) and (2), prepare a standard cost card showing the standard cost of Echol per bottle of cleaning solvent.