AK Chemicals produces high-quality plastic sheeting in a continuous manufacturing operation. All materials are input at the beginning of the process. Conversion costs are incurred evenly throughout the process. A quality control inspection occurs 75% through the manufacturing process, when some units are separated out as inferior quality. The following date are available for December.
|
Materials costs |
£90 000 |
|
Conversion costs |
£70 200 |
|
Units started |
40 000 |
|
Units completed |
36 000 |
There is no opening or closing work in progress. Past experience indicates that approximately 7.5% of the units started are found to be defective on inspection by quality control.
What is the cost of abnormal loss for December?
A £3 600
B £4 050
C £4 680
D £10 800