Chemicals Ltd owns a supply of North Sea gas liquids, and is developing its downstream activities. It is producing two main products, propane and butane, and there is a by product, arcone. There are four manufacturing processes involved where the gas passes through Modules 1, 2, 3 and 4.
Production information for April Year 2 is as follows:
1,000 tonnes of liquid A and 600 tonnes of liquid B were issued to Module 1.
Liquid C is issued to Module 2 at the rate of 1 tonne per 4 tonnes of production from Module 1.
Liquid D is added to Module 4 at the rate of 1 tonne per 3 tonnes of output from Module 2.
Arcone arises in Module 1 and represents 25% of the good output of that process. The remaining output of Module 1 passes to Module 2. Of the Module 2 output 75% passes to Module 3 and 25% passes to Module 4. The output of Module 3 is propane and the output of Module 4 is butane.
Materials costs are:
|
|
£ |
|
Liquid A |
60 per tonne |
|
Liquid B |
40 per tonne |
|
Liquid C |
75 per tonne |
|
Liquid D |
120 per tonne |
The labour and overhead costs during the month were:
|
|
£ |
|
Module 1 |
22,400 |
|
Module 2 |
38,750 |
|
Module 3 |
12,000 |
|
Module 4 |
10,000 |
The company is considering selling the products at the undernoted prices:
|
|
£ |
|
Propane |
130 per tonne |
|
Butane |
150 per tonne |
|
Arcone |
100 per tonne |
Required
(1) Draw a diagram of the various processes described.
(2) Ascertain the percentage profit on selling price per tonne of each of these products.