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ACCA Strategic Professional · Advanced Performance Management · Sustainability

Kestrel Chemicals buys 10,000 kg of input at $4 per kg. 8,000 kg becomes product, and 2,000 kg is lost as waste. Processing cost is $3 per kg of input processed, and waste disposal costs $0.50 per kg of waste. Using material flow cost accounting (MFCA), what is the total cost of the non-product output (waste)?

The waste costs $15,000 under MFCA. Waste is 20% of input, so it carries $8,000 of material and $6,000 of processing cost, plus $1,000 of disposal. Counting only material, or material plus disposal, understates the true cost of waste.

  1. A$8,000
  2. B$15,000
  3. C$7,000
  4. D$9,000Correct

Explanation

MFCA allocates material and processing cost to waste in proportion to its share of the flow, plus disposal. Waste share = 2,000/10,000 = 20%. Material: 20% x $40,000 = $8,000. Processing: 20% x $30,000 = $6,000. Disposal: 2,000 x $0.50 = $1,000. Total = $15,000. The $8,000 option counts material only, and $9,000 adds only disposal to material.

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