Johnson Chemical Company manufactures a wide variety of industrial chemicals and adhesives. It purchases much...
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Johnson Chemical Company manufactures a wide variety of industrial chemicals and adhesives. It purchases much of its raw materials from other chemical companies. One chemical, T-Bar, is prepared in one of Johnsons own plants. T-Bar is shipped to other Johnston plants at a specified internal price. The Johnston adhesive plant requires 10,000 barrels of T-bar per month and can purchase it from an outside supplier for $150 per barrel. Johnstons T-Bar unit has a capacity of 20,000 barrels a month and presently selling that amount to outside buyers at $165 per barrel. The materials are equivalent in quality and functionality. The T-Bar units selling cost is $5 per barrel, and its variable cost of manufacturing is $90 per barrel 2. How would your answers to parts 1 and 2 change if the T-Bar unit had a capacity of 30,000 barrels per month?
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