South Atlantic Chemical Company manufactures industrial chemicals in Rio de Janeiro, Brazil. The company plans to introduce a new chemical solution and needs to develop a standard product cost. The new chemical solution is made by combining a chemical compound (nyclyn) and a solution (salex), heating the mixture, adding a second compound (protet), and bottling the resulting solution in 10-liter containers. The initial mix, which is 11 liters in volume, consists of 12 kilograms of nyclyn and 9.6 liter of salex. A 1-liter reduction in volume occurs during the boiling process. The solution is cooled slightly before 5 kilograms of protet are added. The addition of protet does not affect the total liquid volume.
The purchase price of the direct materials used in the manufacture of this new chemical solution are given below. (The real is Brazil’s national currency. On the day this problem was written, the real was equivalent to 4378 U.S. dollar.)
Nyclyn ……………………………………….1.45 real per kilogram
Salex …………………………………………1.80 real per liter
Protet ………………………………………...2.40 real per kilogram
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