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Question 15.
Sir, I’ve done my calculations as follows :
1,500kg – 945kg = 555kg x $4.25kg = $2,358.75
945kg x $4.50 = $4,252.50
total relevant cost of material b is $4,252.50 + $2,358.75 = $6,611.25
why I multiplied the inventory with the purchased price was because it is not used for the order.
I am wrong because the purchase price of $4.50 is a sunk cost and not relevant?
True – the original purchase price is never relevant.
It will help you to watch my free lecture on relevant costing.
(Our lectures are a complete course for Paper F5 and cover everything you need to be able to pass the exam well.)What you might also find useful is that I have uploaded lectures working through all of the specimen exam questions.
You can find them by following the link to “F5 Revision Kit Live” from the main Paper F5 page.
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