Exercise 25-2 Your answer is incorrect. Try again Hank Itzek manufactures and se
ID: 2525251 • Letter: E
Question
Exercise 25-2 Your answer is incorrect. Try again Hank Itzek manufactures and sells homemade wine, and he wants to develop a standard cost per gallon. The following are required for production of a 330-gallon batch. 3,400 ounces of grape concentrate at $0.02 per ounce 495 pounds of granulated sugar at $0.57 per pound 462 lemons at $0.89 each 990 yeast tablets at $0.26 each 1,650 nutrient tablets at $0.14 each 2,400 ounces of water at $0.001 per ounce Hank estimates that 4% of the grape concentrate is wasted, 12% of the sugar is lost, and 27% of the lemons cannot be used. Compute the standard cost of the ingredients for one gallon of wine. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.) Standard Cost Per Gallon 4.23Explanation / Answer
Costs per 330 gallon batch:
1. Grape concentrate: 3,400 ounces x 100 / 96 x $0.02
= 3,541.67 ounces x $0.02 = $70.83
2. Granulated Sugar: 495 pounds x 100 / 88 x $0.57
= $320.63
3. Lemons: 462 lemons x 100 / 73 x $0.89 = $563.26
4. Yeast tablets: 990 tablets x $0.26 = $257.4
5. Nutrients tablets: 1,650 tablets x $0.14 = $231
6. Water: 2,400 ounces x $0.001 = $2.4
Total cost per 330 gallon batch = $1,445.52
Therefore, standard cost per gallon = 1,445.52 / 330
= $4.38
Explanation of order quantity considering expected normal loss:
If 3400 ounces of grape concentrate are required to manufacture a product and it is expected that 4% of grape concentrate will be wasted (normal loss), we will have to input as many ounces of grape concentrate as required to ensure that the quantity of grape concentrate remaining after wastage (96%) is 3,400 ounces. Therefore, the quantity of grape concentrate we would have to input, assuming that 3,400 ounces is 96% would be:
3,400 / 96 x 100 = 3,541.67 ounces
To verify that this is correct, if we input 3,541.67 ounces of grape concentrate, 4% will be wasted:
3,541.67 x 4% = 141.67 ounces
The same logic must be applied to sugar granules and lemons.
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