2013 Budgeting Sample Assessment 1  Question 3a
flyhigh
Registered Posts: 18 Regular contributor ⭐
I am trying to do this question and struggling with the result of the £ answer in the "Used in Production" Line.
The production requirement is 589,000 units and each unit requires 0.75kg. Thus 589,000 * 0.75 = 441,750 kg. Fine.
To get the cost, as I have understood the teaching  the rule of thumb is "Cost divided by Qty".
Therefore £598,000 purchased 460,000kg giving a price per kg of £1.30
The cost of 441,750 kg used in production is 441,750 * 1.3 = £574,275
However the "correct" answer gives £569,275. Working the theory above backwards I get a price of £1.28868?
Where is my process going wrong?
Thanks very much
The production requirement is 589,000 units and each unit requires 0.75kg. Thus 589,000 * 0.75 = 441,750 kg. Fine.
To get the cost, as I have understood the teaching  the rule of thumb is "Cost divided by Qty".
Therefore £598,000 purchased 460,000kg giving a price per kg of £1.30
The cost of 441,750 kg used in production is 441,750 * 1.3 = £574,275
However the "correct" answer gives £569,275. Working the theory above backwards I get a price of £1.28868?
Where is my process going wrong?
Thanks very much
0
Comments

Hi,
Workings are as follows:
You are correct in terms of material required: 589,000 x .75 = 441750kg
You have to remember that you have opening inventory to be used up first
Therefore the 441750kg is made up of 50,000kg (opening stock) and 391750kg of the purchases
You are right that purchases equals £1.30 per kg, so 391750 x 1.30 = £509725
Add this to the total opening inventory (50,000 kg used in production), £60,000
=509725 + 60000 = £569275
Hope this helps0 
Thank you very much0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 12.5K For AAT students
 318 NEW! Qualifications 2022
 161 General Qualifications 2022 discussion
 11 AAT Level 2 Certificate in Accounting
 56 AAT Level 3 Diploma in Accounting
 87 AAT Level 4 Diploma in Professional Accounting
 8.8K For accounting professionals
 23 coronavirus (Covid19)
 272 VAT
 92 Software
 273 Tax
 135 Bookkeeping
 7.2K General accounting discussion
 200 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 345 Feedback for AAT
 2.8K Chat and offtopic discussion
 582 Job postings
 16 Who can benefit from AAT?
 36 Where can AAT take me?
 42 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 66 AAT membership