Question

A laundry can purchase soap containing 30% water for a price of $0.30/kg FOB the soap manufacturing plant (i.e., at the soap plant before shipping costs, which are owed by the purchaser of the soap). It can also purchase a different grade of soap that contains only 5% water. The freight rate between the soap plant and the laundry is $6.05/100 kg. What is the maximum price the laundry should pay for the 5% soap?

Answer 1

basis - 100 kg soap mixture- solid soap - 70 kg water - 30 kg fob price of this soap = 100 *0.3 =30 dollars solid soap fob price = 30 *70/100 =21 dollars the fob price of water in this soap= 30-21 =9 dollars the freight rate of this soap = $ 6.05 /100 kg total cost of the soap = 30 + 6