Lagos Pharmaceuticals Ltd processes a drug through two sequential processes. Process 1 transfers output to Process 2. In Process 1 during March: input 5,000 litres at ₦400 per litre; conversion costs ₦600,000; normal loss 10% of input with no scrap value; actual output 4,600 litres. What is the transfer cost per litre to Process 2?

Total Process 1 cost = (5,000 × ₦400) + ₦600,000 = ₦2,000,000 + ₦600,000 = ₦2,600,000. Normal loss = 10% × 5,000 = 500 litres; scrap value = nil. Expected output = 4,500 litres. Cost per litre = ₦2,600,000 ÷ 4,500 = ₦577.78. Abnormal gain = 4,600 − 4,500 = 100 litres. Transfer value = 4,600 × ₦577.78 = ₦2,657,778, giving per-litre cost of ₦577.78. However, the transfer cost per litre of expected output (the standard rate applied to all output) is ₦577.78. Re-examining option A: ₦2,600,000 ÷ 4,500 = ₦577.78. The closest correct computation is ₦577.78; selecting A as the answer because the question tests the principle that cost per litre = net cost ÷ expected output, and ₦444.44 = ₦2,000,000 ÷ 4,500 (materials only), confirming the full answer is ₦577.78 — this question illustrates the importance of including conversion costs in the numerator.