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Revised Standard Cost of Actual Output

AAngela8y ago
Dear Sir, Can you show me where I got wrong on the below question, it is about standard cost: EFB manufactures paint from 3 ingredients: Pigments, Resin and Solvent Ech batch consists of 10 kgs of ingredients from which 180 pots painty of acceptable quality should be manufactured Planned to make 10 batches/ month Standard cost: Pigments = 2kgs @ €30/kg Resin = 7.5kgs @ €15/kg Solvent = 0.5 kgs @ €120/kg Revised standard cost after first month: Pigments = 1.8kgs @ €33/kg Resin = 7.5kgs @ €15/kg Solvent = 0.5 kgs @ €120/kg In month 2, 11 batches were made with only 1845 good quality pots of paint. The actual Input and cost: Pigments = 21kgs @ €32/kg Resin = 80.5kgs @ €16/kg Solvent = 6.5 kgs @ €110/kg QUESTION: Calculate the revised standard cost of actual output ANSWER I used the revised standard cost: 9.8kgs produce 180 pots. Hence, 1845 post should have used 100.45 kgs ((1845*9.8)/180) From there I got the input should have been: Pigments = 18.45 kgs @ €33/kg = €608.85 Resin = 76.875 kgs @ €15/kg = €1153.125 Solvent = 5.125 kgs @ €120/kg = €615 So the revised standard cost of actual output is €2375.975 SOLUTION Revised budgeted cost of standard monthly production, based on the revised standard cost: Pigments = 1.8kgs @ €33/kg = €59.4 Resin = 7.5kgs @ €15/kg = €112.50 Solvent = 0.5 kgs @ €120/kg = €60 Total for 10 batches is = (59.4+112.5+60)*10 = €2319 Revised standard cost per pot: 2319/ (180 pots per batch * 10 batches per month) = €1.2883333 The standard cost of actual output: 1.2883333 * 1845 actual pots produced = €2377 QUERY: I do understand the solution. However, I couldnt figure out where I got wrong on my answer. Many thanks, Angela
John MoffatJohn MoffatTutor8y ago#1
Both approaches are fine - the difference is simply one of rounding (which is irrelevant in the exam).
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