Question 1

Section A

CityGrid Utilities operates a water purification process. In May, 10,000 liters of raw water were input at a cost of $15,000. Conversion costs were $8,000. Normal loss is expected to be 5% of input, and these losses have a scrap value of $0.50 per liter. Actual output was 9,200 liters. What is the cost per expected liter of output (rounded to two decimal places)?

Accepted Answer

Formula: (Total Costs - Scrap value of Normal Loss) / (Input units - Normal Loss units).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Dividing by actual output (9,200) or forgetting to subtract the scrap value of normal loss from total costs.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 3

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