PCR Question

System

Hi guys im hoping for a bit of advice.
In section 1 of a PCR paper a standard question which seems to always come up is 'prepare production budgets in units for period 1 for both products eg, EXE and WYE' My typical answer would then be eg,

EXE WYE
8820 (Units)
+Clos Stock 5292
-Open Stock (4410)
Good Prod 9702
Scrap/wastage 198
Total Prod 3500


WYE
5800
+Clos Stock 3016
-Open Stock (2320)
Good Prod 6496
Scrap/Waste 132
Total Prod 2800

This is how i have been taught to answer this question. But the answer paper for this Question (December 2003) does not include the calculations for the scrap/wastage. They have included it in the answer for the next question which is 'Prepare a material purchase budget'. I have looked at more recent past papers and the answers for them are the same way as iw would do it.
Can anyone advise me on which way i should answer it please.

System

Re:PCR Question

The trick is that if material is wasted before the production process, then waste is included in the materials budget. It means that there is insufficient material to complete the demand.

For example:
Materials required 10,000kg
wastage 3/100x10,000kg =
Gross material required =10,300
(300kg would automatically be lost but the final output of good units would not be effect, as you have accounted for the loss in materials)

Production budget is only adjusted for scrap or waste if found at the end of produciton that items are no good, ie the need to increase the Good production required by grossing up the wastage expected.

EG. demand of 1000 units (but 3% of produced is scrap and not found until end of production line.

Good production = 1000
Wastage 3/97x1000= 31
Gross production = 1,031

The exams papers you are attempting are correct but state the different times when the loss should be accounted for.

System

Re:PCR Question

Thanks for your reply. i'll have to work through a couple of questions to see if i understand it. Hopefully i'll get there in he end