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Hi,
Please could you help me in understanding part of the answer to this question:
ABC manufactures product x in a single process. Normal loss (scrap) in the process is 10% of output and scrapped units can be sold off for $4/unit.
In period 8, no opening/closing inventory. Total process costs $184800. Input in the month 13200 units.
What was the cost/unit produced?
I do not understand the part where the normal loss is working out. In the answers it has worked it out to be:
13200 x 10/110
why 110? I understand loss is at 10% but am really confused as to why its been calculated that way.
Expected output is then 12000. I understand the rest of the working to get the cost/unit however the above is puzzling.
Many thanks for your help and again for this service! Great job 🙂
The normal loss is 10% of output.
Therefore for every 100 units output, the loss must have been 10, which means that the input must have been 110.
(Input 110, lose 10, so output = 110 – 10 = 100)So since the input is 13,200, the loss (at 10 units for every 110 input) must be 10/110 x 13,200.
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