Humbug Ltd manufactures artificial Christmas trees in batches of 600. During October, batch no. 701 was manufactured at the rate of 12 per hour. Ninety of the trees failed quality tests, but of these, 50 were thought to be rectifiable. The remaining 40 were scrapped, and the scrap value was credited to the cost of the batch as a whole.

Rectification work took 6 hours. Costs were as follows:

Batch No. 701 £

Raw materials per tree 2.40 Scrap value per tree 0.75 Machinists’ hourly rate 4.80 Machine-hour overhead 5.30 Setting up of machine: normal machining 15.00 Setting up of machine: rectification 10.00

(a) Calculate the cost of a full batch, in total and per unit, if all units pass inspection.

(b) Calculate the actual cost of batch no. 701, in total and per unit, after crediting the recovery value of the scrapped trees, and including the rectification costs.

(c) Calculate the loss incurred because of defective work.