Detailed Answer
Answer (D) is correct.
First, it is necessary to find the actual amount of materials used in each
unit of finished good, including the evaporated material. Since 4% of the
total amount evaporates, an equation can be set up as X oz × 96% = 9 oz.
The variable X is 9.375 oz, which is the amount of raw materials input
for one unit of finished goods. The evaporated material should be
counted since it is normal spoilage, which is spoilage that occurs under
normal operating conditions. Normal spoilage conditions are absorbed
into the cost of the finished good.The cost per ounce of raw materials is $2.20. This contains the cost to ship each ounce of materials. Any cost necessary to get the material to the production process is included in the cost of direct materials. The total cost of raw materials contained in one unit of finished goods is $20.63, which is the product of $2.20 per ounce and 9.375 ounces per unit.