ACCA MA · Chapter 8 · Question 4 of 12
A process takes in 10,000 kg of material costing $46,000, and conversion costs are $20,600. Normal loss is 4% of input and can be sold as scrap for $1.50 per kg. What is the cost per kg of expected output?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $6.875
Explanation
Total cost = 46,000 + 20,600 = $66,600. Normal loss = 4% x 10,000 = 400 kg, scrap value 400 x 1.50 = $600. Expected output = 10,000 - 400 = 9,600 kg. Cost per kg = (66,600 - 600) / 9,600 = 66,000 / 9,600 = $6.875. Forgetting to deduct the scrap value gives $6.938.
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