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Hi,
I don’t understand the method of calculating the material cost.
The answer given is as below:
Material cost ($16 x 10kg/8kg)
= $20Is it because we bought it for $160 and since only 8 kg comes out for every 10 kg of material going in, we have to divide it by 8 kg to know the actual cost that we actually incurred per kg of material?
Sorry, I forgot you don’t have the Kaplan Kit.
The question is as below:
The predicted selling price for a product has been set at $56 per unit. The desired mark-up on cost is 25% and the material cost for the product is estimated to be $16 before allowing for additional materials to allow for shrinkage of 20% (for every 10kg of material going in only 8kg comes out).
If labour is the only other cost and 2 hours are needed what is the most the business can pay per hour if cost gap is to be avoided?
The maximum rate per hour is (2 d.p)
= ( fill in the blank )Thank you in advance.
Answer given:
Selling price
$56.00Profit
$11.20Target cost
$44.80Material cost
$20.00Labour – 2 hours
$24.80Labour rate per hour (24.80/2)
$12.40
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