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Hi,
Can you advise why you would use the total of manufacturing costs as your basis to confirm % of external failure costs as done in the q?
3100 / (8400+3000) = 27.20 %
I would of taught it was on the total costs? = 3100 / 22,000 = 14.10 %
Appreciate if you can confirm why?
Thanks,
Ed
I think it is most useful to compare the initial cost of manufacturing to the external failure costs.
If you compare to 22,000 you are including some failure costs in the 22,000 which rather flatters the figure by reducing the % cost.
I don’t think it’s a fatal difference.
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