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Hammer (6/10)
For part a) of this question, should the manufacturing process loss of 5% be calculated on steel costs of 4000 or is the 4000 figure after deducting 5% input loss.
The percentage to be applied to the steel costs of 4000 is 95%, 105% or 100%..
Is the 1000kg output is equal to 95% of input, 105% of input or 100 % of input.
For part (a) we need to cost of steel per unit.
Each unit contains 0.4kg. Since they lose 5% of the steel purchased they are only left with 95% for the unit. Therefore for each unit they need to buy 0.4kg/95%.
So the cost of steel for each unit produced is 0.4kg/95% x $4 = $1.68.
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