X company intend to manufacture 100,000 units of product M. Each unit of product M requires one
Question:
X company intend to manufacture 100,000 units of product M. Each unit of product M requires one unit of the three types of raw materials namely A,B and C.
Material A is in regular use of the company and the stocks are replaced as and when exhausted.
Material B is not in regular use of the company but as a result of overbuying in an earlier contract, the company at present holds a stock of 60,000 units.
Material C is used only in product M and hence the company has to purchase the same as per the requirement of production of the product. The data relating to the three items of raw materials are as under:
Raw materials | Current stock(units) | Cost per unit of Raw material | ||
Original cost(RO) | Current Replacement (RO) | Current resale cost(RO) | ||
A | 100,000 | 2.000 | 2.500 | 1.750 |
B | 60,000 | 3.500 | 3.000 | 1.000 |
C | nil | nil | 6.000 | 5.000 |
You are required to calculate the cost of materials used in manufacture of 100,000 units of product M.
Small Business Management Entrepreneurship and Beyond
ISBN: 978-0538453141
5th edition
Authors: Timothy s. Hatten