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1. T Co. (12/11)
Can you explain points (2) , (6) , and (8) .
In point 2 , as you have explained it in the lectures that we need to add the lost contribution as its a relevant cot but why we are not doing in this question .Point 6 and 8 I completely didnt get the idea .
(2) If we take the men from the existing job then we would need to bring in their wages and the lost contribution. However the question says that there is an alternative – we can delay the other job for a week and then they have plenty of time so there will be no cost at all except for having to pay a penalty. It would cheaper to do this and only pay the 500. Whenever there is an alternative we always choose the cheapest one.
(6) This is very standard (and is stressed in the revision lectures). If inventory is in regular use then the cost of using any for the contract is the cost of replacing them (because they will be needed elsewhere).
(8) Same as (6). The inventory is in regular use and so we need to replace what we take at whatever the purchase price is (here 1.30 a metre).
I understood the 2nd part and the 6 and 8 i know the idea but problem in calculation . In all of your questions the usage of material was less than that of the inventory which was held but here its opposite so in part 6, only80 are there in inventory and we meed to buy the remaining 40 so will we be doing like : 80 * 18.20 – REPLACING COST AND 40*18.20 – purchasing the new 40 . although we can do it together for my understanding i did it like this . Is this the logic behid this ? is the same logic apply to part 8 also ?
Yes – that is correct. If they are not in inventory then we have no choice other than to buy them.
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