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Need help on a question I think the revision kit has an error…
Company makes product M which uses 3kg of material X. Open inventory:
Material X = 5,000kg @ £4
Product M = 3,000 units.Budget sales = 48,000 units occurring evenly throughout year.
Closing inventory:
Material X = one months worth of production.
Product M = two months worth of salesWhat is material X purchases budget for year in kg?
Answer: 162,000kg
Note earlier parts of question were…
How many of product M are to be produced in year = 53,000
How many kg of material X are required for production in year = 159,000kg
The closing inventory of X is 1/12 x 159,000 = 13,250
The purchases are therefore 159,000 – 5,000 + 13,250 = 167,250
Calculate the most appropriate cost unit for a distribution division of a multinational company?
Miles travelled 636,500
Tonnes carried 2,479
Number of drivers 20
Hours worked by drivers 35,520
Tonnes/miles carried 375,200
Costs incurred $562,800How to calculate this question?
In future, please start a new thread when it is about something else – this is nothing to do with the original post 🙂
The most appropriate cost unit will be to charge the overheads on the basis of tonnes/miles.
However, either you have not typed out the whole question (or the book in which you found it has missed out some information).Also, in the exam, it would either ask you to state the most appropriate cost unit, or calculate the cost per appropriate cost unit (to say calculate the most appropriate does not really make sense).
It seems that it is probably $562,800 / (636,500 x 2479) per tonne/mile.
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