In September, STF Limited used 4,000 litres of material in its production of high strength sealant. Normal losses are 10% of input materials. All losses can be sold for £0.72 per litre. Materials for the month cost £34,560 while conversion costs were £16,128. 3,600 litres of high strength sealant were produced during September. What is the per litre cost of the finished production of high strength sealant in September?

Question

Quizplus · Accepted Answer

The total cost of production includes both material and conversion costs, which is £34,560 + £16,128 = £50,688. Given that 3,600 litres of sealant were produced, the per litre cost is £50,688 / 3,600 = £14.08. However, the question asks for the cost of the finished production, which should also consider the revenue from selling the normal losses (400 litres at £0.72 per litre = £288). Subtracting this revenue from the total cost gives £50,688 - £288 = £50,400. Therefore, the adjusted per litre cost is £50,400 / 3,600 = £14.00.

In September, STF Limited Used 4,000 Litres of Material in Its