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?
This 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 explain
1 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)
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