Harnish Corporation is developing standards for its products. One product requires an input that is purchased for $55.00 per kilogram from the supplier. By paying cash, the company gets a discount of 8% off this purchase price. Shipping costs from the supplier's warehouse amount to $5.17 per kilogram. Receiving costs are $0.28 per kilogram. Each unit of output of the product requires 0.75 kilogram of this input. The allowance for waste and spoilage is 0.04 kilogram of this input for each unit of output. The allowance for rejects is 0.11 kilogram of this input for each unit of output.
-The standard price per kilogram of this input should be:
A) $55.00
B) $56.05
C) $53.95
D) $64.85

Question

Quizplus · Accepted Answer

To determine the standard price per kilogram of the input, we need to consider all the costs involved in acquiring and using the input.

The cost of the input per kilogram after the cash discount is:

$55.00 - 0.08($55.00) = $50.60

Adding the shipping and receiving costs:

$50.60 + $5.17 + $0.28 = $56.05

However, we also need to account for the waste and reject allowances.

For each unit of output, we need 0.75 + 0.04 + 0.11 = 0.9 kilograms of the input.

Therefore, the standard price per kilogram of input is:

$56.05 / 0.9 = $62.28

However, this is not one of the answer choices. We need to round to the nearest cent.

Rounding $62.28 to the nearest cent gives us the final answer of:

$62.30, which is not one of the answer choices.

However, we can see that choice B is the closest answer choice to $62.30, so it is the best choice.

Harnish Corporation Is Developing Standards for Its Products