- This topic has 1 reply, 2 voices, and was last updated 6 years ago by
.
- Posts
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?
A 3,920
B 3,880
C 4,080
D 4,040This is from the MA1 specimen examination on the ACCA website.
The answer is C 4080 however I am not sure how they worked it out can you please explain1 finished unit has 1.8kg of material.
Therefore 2,000 units will each have 1.8kg.
BUT, because or the 10% weight loss, for each unit, the input will need to be 1.8 ÷ 90% = 2kg – i.e. 4,000 kgs in totals.
For raw materials: Op inventory + purchases – closing inventory = Use in production
You know everything now except purchases: 420 + purchases – 500 = 4,000
Rearranging, purchases = 4,080
(i.e you had to buy 4,000kg for production and another 80kg to increase inventory level)
- You must be logged in to reply to this topic.