Question on Budgeting - help needed!

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cazalino
cazalino Registered Posts: 44 Epic contributor 🐘
in AAT Level 4 (Level 8 in Scotland)
Can anybody tell me how you would calculate the answer to this question as i cant get my answer to match the correct answer! 50,000 items of product M are required to be manufactured in April. Each requires 10 meters of raw material 20% of raw material is wasted during manufacture. Opening Inventory is 4000 meters, closing inventory is 6000 meters - thanks guys in advance!

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  • cazalino
    cazalino Registered Posts: 44 Epic contributor 🐘
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    Maybe i should add... the answer is 627000 but i keep getting 627500. I think its to do with the opening/closing stock - i dont know how to treat this
  • steve2008
    steve2008 Registered Posts: 89 Epic contributor 🐘
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    The wastage only occurs during the manufacturing process. So there is no wastage on the increase in inventory. Add it after allowing for the production wastage.
  • kkelly
    kkelly Registered Posts: 51 Epic contributor 🐘
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    Hi cazalino
    50,000 * 10 / .8 ( to allow for 20% wastage ) = 625000
    add in increase in inventory +2000 = 627000

    Hope this helps!!
  • cazalino
    cazalino Registered Posts: 44 Epic contributor 🐘
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    Arh yes that rings a bell now from reading the text book where you add the difference of increase ie 2000 in this case. Thank you thats cleared that one up for me :thumbup1:

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