Question

Wesco Incorporated's only product is a combination fertilizer/weedkiller called GrownWeed. Zwinger Nursery plans to sell a similar fertilizer/weedkiller compound through its regional nursery chain under its own private label. Zwinger does not have manufacturing facilities of its own, so it has asked Wesco (and several other companies) to submit a bid for manufacturing and delivering a 28,000-pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from that of GrownWeed, the manufacturing processes are very similar. The Zwinger compound would be produced in 1,000-pound lots. Each lot would require 38 direct labor-hours and the following chemicals:

a. Define the optimal production quantity for each lot.
b. Identify the total direct labor-hours needed for the entire 28,000-pound order.
c. Calculate the total chemical cost for the 28,000-pound order.
d. Determine the bid price per pound to ensure Wesco covers its manufacturing costs and makes a profit.

Answer 1

To define the optimal production quantity for each lot, divide the total order quantity by the number of lots. Identify the total direct labor hours needed by multiplying the number of lots by the direct labor hours per lot. Calculate the total chemical cost by determining the cost of each chemical and multiplying it by the quantity needed.

Step-by-step explanation:

To define the optimal production quantity for each lot, we can calculate the number of lots needed to fulfill the 28,000-pound order and then divide the total order quantity by the number of lots. In this case, the order quantity is 28,000 pounds and each lot requires 1,000 pounds, so the optimal production quantity for each lot is 28.

To identify the total direct labor hours needed for the entire 28,000-pound order, we multiply the number of lots (28) by the direct labor hours per lot (38), resulting in 1,064 direct labor hours for the entire order.

To calculate the total chemical cost for the 28,000-pound order, we need to determine the cost of each chemical and then multiply it by the quantity needed. The cost for 25 pounds of Treflan can be calculated using the conversion factor of 1 pound = 454 grams and the cost per gram of Treflan. Similarly, the cost for 0.125 kilograms of Paris Green can be calculated using the cost per kilogram of Paris Green. Once we have the costs for each chemical, we can add them together to determine the total chemical cost.

To determine the bid price per pound that ensures Wesco covers its manufacturing costs and makes a profit, we need to consider the manufacturing costs and desired profit margin. This includes the direct labor cost, chemical cost, and any additional production costs. Once we have the total manufacturing cost, we can divide it by the total order quantity (28,000 pounds) to calculate the bid price per pound.