Vebco manufactures a product requiring 0,5 gram of platinum per unit. The cost o

Question

Vebco manufactures a product requiring 0,5 gram of platinum per unit. The cost of platinum is approximately R360 per gram. Vebco maintains an ending inventory of platinum equal to 10 per cent of the following month's production. The following data were taken from the most recent quarterly production budget.

July

August

September

Planned production (units)

1 000

1 100

980

Determine the cost of platinum purchased in August.

A.        R195 840         /

B.         R198 000

C.         R200 160

D.        R391 680

E.         R400 320

July

August

September

Planned production (units)

1 000

1 100

980

Explanation / Answer

Platinum purchased in August =(1100*0.5)+(980*0.5*10%)-(1100*0.5*10%)= 544 Cost of platinum purchased in August = 544*360= 195840 Option A is correct

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