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ACCA Strategic Professional · Advanced Performance Management · Sustainability

Marlow Chemicals produces 10,000 litres of input material a month at a cost of $6 per litre. Normally 8% of input becomes waste and is disposed of at $1.50 per litre of waste. Under material flow cost accounting (MFCA), waste is treated as a negative product that carries its share of material, conversion and disposal cost. Material cost only is considered here. What material cost is attributed to the negative product each month, excluding disposal cost?

The negative product carries $4,800 of material cost. Waste is 8% of 10,000 litres, or 800 litres, valued at the input price of $6 per litre. Disposal cost of $1,200 is separate, and $55,200 is the material in good output.

  1. A$4,800Correct
  2. B$1,200
  3. C$60,000
  4. D$55,200

Explanation

Waste is 8% x 10,000 = 800 litres. Material cost assigned to the negative product is 800 x $6 = $4,800. Adding disposal ($1,200) would be a different measure, and $55,200 is the cost of the good output (9,200 x $6).

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