- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
“Material A: Appler needs 500 kg of material for the compound but has 200 kg in stock present. The stock items were bought 3 months ago for $5/kg but have suffered 10% shrinkage since that date. Material A is not regularly used in the business and would have to be disposed of at a cost to Appler of $400 in total. The current purchase price of material A is $6.25/kg”
Since the stock items have suffered a 10% shrinkage the kgs in the stock must be 200*0.9=180 so we need to buy 500-180=320 kgs and the relevant cost must be 320*6.25=2000 and minus the savings of 400=$1600.
But the answer does not taking account of the shrinkage and calculating as 300*6.25=1875 minus the savings =$1475.Please tell me why the shrinkage was not taken into account?
If they have 200kg in inventory, then the shrinkage must have already happened (and is simply mentioned to cause confusion 🙂 )
@johnmoffat said:
If they have 200kg in inventory, then the shrinkage must have already happened (and is simply mentioned to cause confusion 🙂 )Testing concepts is justified as the ultimate objective is learning but confusing students to make mistakes is not justified.
So called examiners are damn good in making our lives more difficult lol
- The topic ‘Relevant costing’ is closed to new replies.