Pcr

Terdoo

I thought the budget production in unit
is: Sales
Add closing Stock
Less opening stock
Gross production unit

And the Material Purchase in unit is:
Gross production Divide by kilos or square
Then Wastage/Faulty good
Material required

But in some papers Budgeted production unit includes wastage so how would u know when to include wastage on budgeted production unit? is anyone having the some problem?
Pls help with any explanation.
Thank you

borolad

Hi Terdoo. Wastages which occur during production usually affects RAW MATERIALS usage hence, you apply the % wastage to your calculation of material purchases. In that way, you have made allowances for the wastages to materials during production.
On the other hand, you sometimes have DEFECTIVE GOODS which from the name indicates a fault in a finished good or item. This is the one you apply to your production budget. You add the wastages here to your GOOD PRODUCTION to arrive at total PRODUCTION REQUIRED. I hope this is clear enough.

beansprout64

You need to look at what the question says and the information given to you.

On the past papers it says that a % of total production is wasted or materials. If total production is wastage then you therefore add wastage if the budget production. If the materials are wasted then you add it to the materials bit.

There is not always wastage/faulty for materials.

Terdoo

Re Pcr Wastage %

Thank you very much you made my day, it really help my understanding.