I am little confused to calculate Rework Cost .
It says in question that
Rework cost:this is the average rework cost per webcam and is based on an estimate of 15% of webcams requiring rework at a cost of $20 per rework. With the use of more standard parts,the rate of rework will fall to 10% and the cost of each rework will fall to $18.
My question is Why they dont use this calculation i.e 50000*.9*18=810000/50000=16.2
Because the rate will fall 10% means 10% less.
Is this correct?
I am looking forward to hearing from you.
Ask the Tutor ACCA PM
June 2013 Q-3
10y ago#1The question says that the reworking will fall to 10%.
So if they make 50,000 units it means that will have to spend money on reworking 10% x 50,000 units, at $18 each.
Sign into reply to this topic.