Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Relevant cost question from BPP revision kit
- This topic has 2 replies, 2 voices, and was last updated 8 years ago by John Moffat.
- AuthorPosts
- May 16, 2016 at 9:34 am #315297
Hi, I have doubts about the answer to the following question from BPP revision kit. It seems to me that relevant cost for material X is not correct.
Shouldn’t it be 300×3+200×7=2300? If not, what is the correct relevant cost for material X?The following information is available for identifying the relevant cost of materials for a job for a customer.
The company’s management wants to establish a minimum price at which it is prepared to take on the job.
Material Total quantity Currently in Carrying value Realisable value Replacement
required inventory per kg per kg cost per kg
kg kg $ $ $
W 500 0 – – 8
X 500 300 5 3 7
Y 500 400 8 9 11
Z 100 100 10 12 15
Material Y is in regular use by the company. Materials X and Z are no longer in regular use. There is no alternative use for Material X but the 100 kg of Material Z could be used instead of 150 kg of Material V on a different job. Material V costs $9 per kg and there is currently none of this material in inventory.
What is the relevant cost of these materials for the job under consideration?
A $10,850
B $11,350
C $12,200
D $12,350Answer by BPP $
Material W 500 kg × $8 4000
Material X 500 kg x $3 1500
Material Z 500 kg x $11 5500
Material Z Higher of (100 x $12)
and (150 x $9) 1350Total 12350
May 16, 2016 at 9:44 am #315302After submitting post, headings and figures got mixed up, though I wrote it in table format. Please just push the quote, then you will see the question more clearly, if you can’t understand it.
May 16, 2016 at 9:41 pm #315365The BPP answer is wrong – what you have written is correct 🙂
- AuthorPosts
- You must be logged in to reply to this topic.