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Greetings people. I have a question that requires your kind attention.
Product X requires 1.8 kg of a raw material per finished unit. The material has a weight loss of 10% in preparation for manufacture. Inventory of the material is currently 420 kg but needs to be increased to 500 kg. 2,000 units of Product X are to be manufactured.
How many kg of the raw material needs to be purchased to satisfy the above requirements?
I would appreciate it if someone is able to solve it and provide a brief but compact explanation regarding the solution. Thank you.
Hi.
To answer this question, you have to know 2 things:
1. how compute the total amount needed for the required production
2. the formula which calculates the material purchases, which is as follows:Mat’l Purchases=Mat’l Usage + closing bal – opening bal.
Lets do this:
1.
1a. Input -wastage = output.
this shd make sense to u.
1b. Now, if one unit takes in 1.8kg, you need 2000 x 1.8=3600 kg of material.
1c. what will be actual material u need to account for the 10% wastage? to answer this, lets apply the formula:
input – wastage = output
input – 10% x input = output
0.9 x input= 3600
input = 3600/0.9=4000 kg(you can check the answer by deducting 10% of 4000 and see u get 3600)
2. No we apply the formula that you learnt in MA1 paper:
Mat’l purchases = mat’l usage + cl bal – op bal
Mat’l Purchases = 4000 + 500 – 420 = 4080hope this helps
Thank you so much kind sir!!! I didn’t think that you’d need to compensate the weight loss of the material by preparing more material than is required. I totally understand now. Yes it has indeed helped me a lot and it was very easy to understand. You seem to be really good at material costing. I am very grateful for your help.
input – 10% x input = output
“input” is a variable… i cd have written it as
x – 10%x = output
x – 0.1x = output
x(1-0.1) = output
0.9x=outputi also confuse why is 0.9
thanks mansoor explaine ?but izit have more easier way to calculate the 0.9?Think:
Input weight – wastage = output weight
If there is a 10% weight loss, then if you input 1kg the weights will be:
1 – 0.1 = 0.9
So, to get a weight of 0.9 out you need to put in 1
To get 9 out you need to put in 10
To get 18 out you need to put in 20
To get 45 out you need to put in 50 [50 – 10% x 50 = 45]in all cases to move from output weight to input weight you have to divide the output weight by 0.9 eg 45/0.9 = 50.
To get 630 out you would need to put in 630/0.9 = 700. [Check: 700 – 10% x 700 = 630]
10% of input which 1.8 kg raw material is 0.18kg so by this to cover the loss we need 1.98 kg raw material per unit by this answer gets 4040 which is wrong i dont understand how 2 comes
The 10% is how much of the input material is lost.
In your answer, if you input 1.98 and lose 10% you will end up with 1.98 – 0.198 = 1.782, not the 1.8 you need.
1.8 represents what you are left with after losing 10% of the input, so it represents 90% of input. Total input is therefore 1.8/0.9 = 2.
Check: input 2, lose 10% and you are left with the required 1.8.
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