CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis
Mehta Industries fixes the standard material cost for one unit of product as follows: gross input 12 kg at ₹50 per kg, with a normal loss of 10% of input in processing. What is the standard material cost per kg of good output?
The standard cost per kg of good output is ₹55.56. Input of 12 kg costs ₹600 and yields only 10.8 kg after the 10% normal loss, so the cost is spread over good output: 600 divided by 10.8.
- A₹50.00
- B₹55.00
- C₹55.56Correct
- D₹66.67
Explanation
Gross input 12 kg cost 12 x 50 = ₹600. Good output = 12 x 90% = 10.8 kg. Cost per kg of good output = 600/10.8 = ₹55.56. Using ₹50 x 1.10 = ₹55 wrongly adds 10% on output instead of dividing by 90%.
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