White, Inc Each Container of the Chemical Product Contains 5

question 125

Multiple Choice

White, Inc. produces a chemical product whose primary component is purchased on credit and any discounts are always taken. The following material and labour elements make up the costs of the product: $$\begin{array} { l r } \text { Purchase price for material } & \$ 30 \text { per litre } \\\text { Freight and handling } & \$ 130 \text { per } 100 \text { litres }\end{array}$$ Each container of the chemical product contains 5.7 quarts of material. During the process 5% of the material is lost due to waste. Each container of product also requires 1.2 hours of labour. Each day 2 hours are taken for set-up, cleaning, and breaks. Also, the wage rate is $15 per hour and fringes/payroll taxes are 20% of wages. Clients can take a 3% discount if they pay invoices within 10 days; otherwise, the entire invoice amount is due within 30 days. 1 litre equals 4 quarts.
The standard rate per hour is:

• A) $18
• B) $28.80
• C) $12
• D) $21.60

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Definitions:

Invisible Hand

Adam Smith's metaphor describing the self-regulating nature of the marketplace that guides individuals to unintentionally benefit society through personal gain.

Principal-Agent Problem

A dilemma in relationships where one party (the agent) is supposed to act in the best interest of another (the principal) but may have an incentive to act in their own self-interest instead.

Political Corruption

The misuse of public power or position for personal gain, undermining the integrity and fairness of political processes.

Public Choice Theory

The economic analysis of government decision making, politics, and elections.