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ACCA F9 lectures ACCA F9 notes
November 2, 2016 at 1:38 pm
firstly thanks for the wonderful lectures. I would to know if I am right on my understanding of the reason why we should not include the sunk cost in our calculation to make a decision. how I understand is we would like to know whether if we carry on the project from this position we are now would result positive/negative outcome. so we would say in the case of positive outcome it would reduce the impact of any sunk cost whereas if it is negative it would increase the cost further and we reject the project. am I right there?
John Moffat says
November 2, 2016 at 3:15 pm
Yes – you are correct 🙂
September 27, 2016 at 2:46 pm
While deciding whether to accept or decline the project, we’re just considering the additional relevant cost. Shouldn’t the already incured costs of £150,000 also be considered while determining if the project is profitable or not?
June 1, 2016 at 8:04 pm
Thanks very much,well explain and I will apply the same logic when retaking F5
Once again thanxxx.
June 2, 2016 at 5:40 am
You are welcome 🙂
April 28, 2016 at 6:54 pm
Thank you for the lecture. Will there be a difference in decision making if the amount saved on disposal ($5000) is added to cash inflow instead of subtracting it from outflows. What other effect will this have on our calculation. Thank you.
April 29, 2016 at 8:17 am
No – it makes no difference.
April 29, 2016 at 5:49 pm
April 30, 2016 at 9:27 am
January 20, 2016 at 3:32 am
I just passed 2 more exams of acca and all the credit goes to you Mike. These lectures are just so awsome.
January 20, 2016 at 3:34 am
January 20, 2016 at 7:59 am
Thank you, and congratulations 🙂
December 31, 2015 at 5:39 am
Hi sir great lecture. However,
Why do we subtract 5000 and add all the other items in the list of cash outflows. Wont all of it be summed to get the difference?
December 31, 2015 at 9:06 am
I assume that you mean the cost of disposing of the materials if they are not used in the project?
They are subtracted from the other costs in order to get the net cost, because if we do the project we will save 5,000 (we will not have to spend the money to dispose of the materials).
January 2, 2016 at 11:03 am
Oohhh thank you john .. 🙂
January 2, 2016 at 4:58 pm
November 11, 2015 at 8:28 pm
Wonderful lecture as always. Just a small question Sir. I know when dealing with Statement of Cash flows, the treatment of disposal gains or losses uses the same logic as depreciation. Would it be far fetched to think the same should be extended to determining if said expected gains or losses are relevant? specifically, shouldn’t the 2000 disposal value lost be irrelevant?
November 12, 2015 at 6:49 am
The disposal value itself is a cash flow.
The gain or loss on disposal (the difference between the disposal proceeds and the net book value) is not relevant.
November 12, 2015 at 6:01 pm
Ah yes! thank you Sir
November 13, 2015 at 8:45 am
October 24, 2015 at 12:39 pm
Excellent lecture as always. Thank you very much, John. I am forever grateful.
October 24, 2015 at 1:00 pm
Thank you, and you are welcome 🙂
October 2, 2015 at 12:51 pm
Explain wonderful , Thanks Sir.
September 15, 2015 at 6:20 pm
I have a problem as In cash outflow coloumn you marked saved in disposal and saved in material in negative and lost in rent and lost in sales 150,000 as positive as what I understand is I not doing the project materials can be disposed off for 5000 so Could you explain me why you are not considering material as opportunity cost .
September 15, 2015 at 6:32 pm
We are listing the total cost. So, for example, the extra wages needed are a cost and so are shown as positive in the list.
There is a saving on materials (because if we use them in the contract we will not have to pay for their disposal, so we will save 5,000). Because it is a saving, it is shown as a negative cost – it reduces the total cost.
Lost rent (for example) is a cost and therefore it is an extra cost and therefore included in the total of costs.
July 30, 2015 at 7:16 pm
The wrong lecture of inflation(example 1) starts here instead of Relevant Cash Flows for DCF Inflation (example 4).
Could it be sorted ASAP please?
Love all your lectures
July 30, 2015 at 8:29 pm
reload the page
it should be OK now 😉
November 5, 2014 at 11:58 am
can you please explain how we are saving on materials? i did not understand the logic
November 5, 2014 at 12:32 pm
The materials are toxic and if we do not use them in the contract we will have to pay to dispose of them.
If we use them on the contract then we will not dispose of them and therefore will save the cost of disposing of them.
November 5, 2014 at 2:57 pm
the materials of 40000 included in the prime cost is the same as the toxic materials of 40000?
November 5, 2014 at 4:32 pm
There are no materials of $40,000 in the prime cost (and they are not the same materials!).
You did not say which materials you were asking about – the only materials needed for the contract are those under the heading ‘materials’ and they are what my answer here was referring to.
It seems you are actually asking about the relevant cost of the labour used. Because they are being moved from other work there is the opportunity cost of $90,000 of moving them. You can get the same answer two ways – whichever is more obvious to you – either it is the cost of labour (40,000) plus the lost contribution (150,000 – 100,000 = 50000).
Alternatively, if you find it more obvious, if we stop the other production then we lose the sales (150,000). However if we are not producing the other product we do not need to spend the money on the materials for the other product (60,000 (100,000 – 40000)). So the net cost is 150,000 – 60,000 = 90,000.
November 5, 2014 at 5:03 pm
thank you sir for clearing my doubt ????
September 4, 2014 at 5:56 pm
Well done, thank you.
September 4, 2014 at 6:18 pm
And thank you for the comment 🙂
June 5, 2014 at 8:36 am
Hi John. Shouldn’t we discount the redundancy cost that will be incurred in a years time rather than subtract it from the redundancy cost if we were to discontinue the project?
June 5, 2014 at 9:20 am
That would be fine, except that this example specifically says (the last line) to ignore the time value of money (which means to not discount).
This first example is just a check on relevant costs.
April 21, 2014 at 2:34 pm
Excellent Lecture, You are Indeed Legend Sir Moffaat 🙂
December 28, 2013 at 11:28 pm
it was brilliant lecture. well done and thank you.
November 28, 2013 at 5:35 am
Sir, you managed to bring a smile on my face even with exam pressures just around the corner. thank you
November 23, 2013 at 6:49 am
Thank You! A great lecture! 🙂
But I have 2 questions.
1. If we have to rent the premises specifically for this project, then do we consider it as a relevant cost?
2. Why don’t we consider $ 40,000 Labour cost as a relevant cost. I get the point why we don’t consider it when we calculate Loss from the other products. But why don’t we take it to account for this project seperately?
November 23, 2013 at 7:06 am
If we did rent premises specifically, then we would include them (but we don’t in this question).
With regard to the labour, we will be paying them whether we move them to this project or whether they stay where they are – there is no extra cost involved.
November 23, 2013 at 7:24 am
Thanks alot! 🙂
I asked about the question regarding premises in case we don’t come across a question with that point in the examples.
September 10, 2013 at 12:02 pm
Wow! I just realised that I still remember and understand F5 very well! That’s a surprise! lol!
Thank you Mr John, good stuff.
September 7, 2013 at 3:29 pm
Real good stuff! Amazing.
May 11, 2013 at 7:30 pm
i compare the note with the BPP text book and realized that some of topic were skip. why? Is it not important in the exam?
June 6, 2013 at 10:26 am
As we state on this website, the course notes are not meant to replace text books!
However, all the important topics are covered.
March 27, 2013 at 2:51 pm
Thank you truly from the bottom of my heart….. My previous ambiguities about logic of NPV are now clear. You have done a magnificent job. May ALLAH help you in your life, as you helped us.
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November 9, 2012 at 12:12 pm
Excellent Lecture ! thanks
May 19, 2012 at 3:14 pm
Thanks for being so good at explaining!!!!
May 13, 2012 at 10:28 am
for three days now i cannot hear any sound from lectures.
is anyone having the same problem?
if so please admin help sort it out.
May 13, 2012 at 10:45 am
@edrammeh, I can’t fly over and check your PC,..
try another one, and see if you still have problems.
video lecture works fine
April 14, 2012 at 4:37 pm
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March 23, 2012 at 12:53 pm
plz tell us which book does the examiner used ?? thankyou.
April 30, 2012 at 8:41 am
@omer459, THIS IS NOT THE BOOK. NOTEA ARE PROVIDED ABOVE
March 22, 2012 at 6:06 pm
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March 15, 2012 at 4:17 pm
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November 20, 2011 at 9:50 am
excellent lectures- just to clarify if its just me or should the total outflow be 184000 not 174000?
November 5, 2011 at 3:51 pm
Excellent; provides real clarity of the process. I am re-sitting and have found this tutorial invaluable.
October 19, 2011 at 10:49 am
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October 19, 2011 at 11:01 am
Visit this support page for help
October 15, 2011 at 12:07 pm
You are an absolute godsend! 🙂
October 1, 2011 at 9:24 am
Which book does the teacher used? Thank you!
September 12, 2011 at 4:14 pm
loving this site!
August 19, 2011 at 3:53 pm
Thank you so much Open Tuition, your lecture has been useful to me. God will continue to strengthen you all.
arsala khan says
July 10, 2011 at 12:31 pm
very good effort to keep update & coach to the ACCA students, But the video lecture voice are not so clear (upto mark).
April 2, 2011 at 9:16 pm
thanks a lot for your support
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