Question from the Chartered Institute of Management Accountants, Stage 3, May 1995. (45 minutes) :

A pharmaceuticals company has recently developed a new drug called Kabo, which is made using a continuous microbiological process. The process manager is responsible for material procurement.

Four material ingredients (K, A,B and O) are used in the processing of Kabo, all of which are obtainable from a variety of sources. The standard material requirements of 1 kg of Kabo are as follows:

Process losses occur at an even rate throughout the processing operation and tend to rise if impurities are present in the ingredients. The effectiveness of Kabo depends on the quality of the ingredients being used and the maintenance of the ingredient mixture within close limits of that specified above.
At the start of April 1995, 318.6 kg of 40% processed Kabo were held in the division. At the end of April 426.3 kg of 52% processed Kabo were held. During April 831.0 kg of fully processed Kabo were. transferred from the division to the stores. During April the following materials were acquired and input to the process:

Transcribed Image Text:

K 0.33 kg 104.00 per kg 34.32 A 0.28 kg 49.00 per kg 13.72 B 0.23 kg @$186.00 per kg 42.78 0 0.42 kg @ $72.50 per kg 30.45 Total 1.26 kg 121.27