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Skillings Industrial Chemicals, Inc: Costing Analysis

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This question related to management science where we apply what we have learned to complete a project problem. I am trying to ensure I do the mathematical portion correctly. Seeing a solution helps me to understand the math.

Skillings Industrial Chemicals, Inc
Develop an approach to the problem that will allow the company to determine how much primary product to produce, given the limitations on the amounts of the raw material available. Include recommendations as to how the company should dispose of the liquid waste to satisfy the environmental protection guidelines. How many pounds of product K should be produced? How many pounds of product M should be produced? How many pounds of liquid waste should be specially treated and dumped into the river? Include a discussion and analysis of the following in your report:

1. A cost analysis showing the profit contribution per pound for the primary product, product K, and product M.
2. The optimal production quantities and waste disposal plan, including the projected profit.
3. A discussion of the value of additional pounds of each raw material.
4. A discussion of the sensitivity analysis of the objective function coefficients.

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Solution Summary

The Solution completes the costing analysis to provide a basis for answer the Skillings Industrial Chemicals question.

Solution provided by:
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
Recent Feedback
  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
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