VBT Limited produced 4,700 litres of power washer fluid in June. Normal losses are 6% of input materials. All losses have a disposal cost of £0.94 per litre. Materials for the month cost £18,800 while conversion costs were £11,750. There were no abnormal gains or losses in production of power washer fluid in June. What is the per litre cost of the finished production of power washer fluid in June?

Question

Quizplus · Accepted Answer

The total input is 4,700 litres / (1 - 0.06) = 5,000 litres. Total costs are £18,800 (materials) + £11,750 (conversion) + (5,000 litres * 0.06 * £0.94 disposal cost) = £30,750. The cost per litre is £30,750 / 4,700 litres = £6.56.

VBT Limited Produced 4,700 Litres of Power Washer Fluid in June