A chemical company produces a special industrial chemical that is a blend of three chemical ingredients....

A chemical company produces a special industrial chemical that is a blend of three chemical ingredients. The beginning-year cost per pound, the ending-year cost per pound, and the blend proportions follow. (Round your answers to the nearest integer.)

	Cost per Pound ($)
Ingredient	Beginning	Ending	Quantity (pounds) per 100 Pounds of Product
A	1.50	3.45	25
B	8.75	9.90	10
C	0.99	0.90	70

(a)

Compute the price relatives for the three ingredients.

Item	Price Relative
A
B
C

(b)

Compute a weighted average of the price relatives to develop a one-year cost index for raw materials used in the product.

I =

What is your interpretation of this index value?

Cost of raw materials is up % for the chemical.

Expert Solution

orchestra answered 3 years ago

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