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ACCA Applied Knowledge · Management Accounting · Budget preparation

Zeta Co plans to produce 4,000 units of Product K next month. Each unit needs 3 kg of material, and 10% of the material input is lost as normal waste, so the 3 kg is the net quantity in the finished unit. How many kilograms of material must be used in production?

The material usage budget is 13,333 kg. Net requirement is 12,000 kg, and because 10% of the input is lost, the net quantity is only 90% of input. Dividing 12,000 by 0.9 gives 13,333 kg, not 13,200 kg.

  1. A12,000 kg
  2. B13,200 kg
  3. C13,333 kgCorrect
  4. D10,800 kg

Explanation

Net material is 4,000 x 3 = 12,000 kg. If 10% of input is lost, output is 90% of input, so input = 12,000 / 0.9 = 13,333 kg. Option 13,200 kg wrongly adds 10% to the net quantity instead of dividing by 90%.

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