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ACCA DECEMBER 2009 Q5
I would like to ask for the point 2 and point 3 what does it means? I not really understand about itI assume that you are meaning points 2 and 3 of the question.
Point 2 means that if we do stop TD, then the same of the other two will be 5% lower (and to we will lose some contribution on those two as well as losing contribution on TD).
With regard to point 3, since the decision we are making is whether to close TD now or in 12 months time, we need to compare what the costs of closing now will be (i.e. 6,000 plus 1,200) with the costs of waiting 12 months (3,500)
I have a look with the answer from acca official there was mentioned loss at revenue at the first? I not understand y we cannot straight away write loss at contribution?
Besides, for the answer
Note 4: If TD is ceased now, then:
Redundancy cost ($6,000)
Retraining saved $3,500
Recruitment cost ($1,200) ––––––––
Total cost ($3,700)
I not understand y we need to count the retraining save of 3500?? lke ur mention just nw tht is the cost of waiting 12 months but why we have to include it?Is there have any other method that can be apply to do this question?
can we calculate in this way like if the company cease to td now, what will be the cost?
and then calculate cost of waiting 12 months what will be the cost and then compare it see whichever is lower so that to decide which decision to makeYou can write down the lost contribution – that is what the examiners answer shows underneath note 6 as the alternative approach.
Since we are comparing the cost of ceasing now with the cost of ceasing in 12 months time, the 3,500 would only be payable if we wait 12 months – it would not be payable if we ceased now.
Certainly you could do two costings – one if we cease now and one if we cease in 12 months time – and choose the best, but that would take much longer.
(Also appreciate that since this question was asked, the examiner and the format of the exam have both changed. Relevant costing is certainly still examinable, but is likely to be only the MCQ’s rather than as a long-form question such as this.
Okay Thanks for remind but I would just treat it as an exercise . If I choose to do it in two costings one cease now and cease in 12months time. Do I need to include the Retraining saved $3,500 in the costing of cease now? or we just have to include in the costing of cease in 12 months?may I know what does the point 4 useful in? because there mention all material on td for 12 months would be saved if td cease now and material costs relates to lost sales on the wm and the dw also be saved? I not really understand about it. If i do in 2 costings how will it affect?
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