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kaplan 44 /
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 $16 before allowing
for additional materials to allow for shrinkage of 20% (for every 10 kg of material going in
only 8 kg comes out).
If labour is the only other cost and 2 hours are needed what is the most the business can
pay per hour if a cost gap is to be avoided?for material cost the answer is 20
but the note is confusing little bit, if i answered base on 20 % =16*120% = 19.2$
if for every 10 only 8 is come
16/10*8=12.8
16-12.8=3.2
16+3.2=19.2isn’t that make sense ? why i have to do it like 16/8*10?
So the material cost for the product is estimated to be $16 before allowing for additional materials to allow for shrinkage of 20% (for every 10 kg of material going in, only 8 kg comes out).
This means that to calculate the cost per unit, you need to consider the shrinkage.
For every 8 kg of material needed, they have to buy 10 kg.
So, the cost of materials per unit is calculated as 10/8 * $16 which is $20
Does this help?
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