Pluton Makes Particular Plastics for Sale to the Public and the Government

question 11

Multiple Choice

Pluton makes particular plastics for sale to the public and the government. Basic cost data for a 100-pound drum of one particular product called Xentra appears below: $$\begin{array} { | l | r | r | } \hline & \text { Qty } & \text { Cost } \\\hline \text { Chemical Xeta, gals } & 15 & \$ 25.00 \\\hline \text { Chemical Thenta, gals } & 35 & \$ 27.50 \\\hline \text { Base material, lbs } & 20 & \$ 1.00 \\\hline 100 \text {-Ib lined drum } & 1 & \$ 51.83 \\\hline\end{array}$$ Variable factory overheads are estimated to be $1,200,000 per month, when 1,000,000 pounds of various products are produced. The plant employs 20 chemical workers who typically work 175 hours each per month and are paid $24 per hour. Other workers are classified as indirect and are included in fixed overheads. The highly automated plant typically runs 21,000 machine hours per month. The preparation of one 100 lbs batch of Xentra needs ten minutes of direct labor and 75 minutes of machine time. Fixed manufacturing overheads total $3,500,000 per month. Forty percent of these fixed manufacturing overheads are labor-related costs and the balance are machine-related costs. Assuming normal production levels, what is the conversion cost (direct labor and overhead) per drum?

• A)$191.67
• B)$287.40
• C)$311.67
• D)$315.67
• E)None of the above

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Definitions:

Global Commodity Chain

The global commodity chain analyzes the worldwide network of production and distribution processes through which a product passes until it reaches the consumer, highlighting the economic and social implications of globalization.

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Government Transfers

Payments made by the government to individuals, households, or companies which do not require repayment, including welfare benefits, subsidies, and grants.

Income Inequality

The unequal distribution of income within a population, leading to economic disparity between the richest and poorest individuals.