• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exams

How was your exam? Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

Relevant cost issue

Forums › ACCA Forums › ACCA PM Performance Management Forums › Relevant cost issue

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 31, 2018 at 1:26 pm #470519
    vitfin
    Member
    • Topics: 3
    • Replies: 1
    • ☆

    Hello everyone, I am stucking at this question from Mock exam of BPP about relevant cost, the question is:

    “Search Co would also need a computerised operating system called ‘Check 2’. The current market price of Check 2 is $12,800, although I Co has an older version of the system, ‘Check 1’, in inventory, which chould be modified at a cost of $5,800. I Co paid $4,500 for Check 1 when it ordered it in error 2 months ago and has no other use for it. The current market price of Check 1 is $5,000, although if I Co tried to sell the one they have, it would be deemed to be ‘used’ and therefore only worth $3,500.

    What is the relevant cost of the computerised operating system?”

    The answer is $9,300.

    Explaination:
    If check 1 was not used it could be sold for $3,500 -> $3,500 are relevant
    In order to used it must be modified at a cost of $5,800 -> $5,800 are relevant
    Therefore, the total of $9,300 (=$3,500+$5,800) are relevant

    I think, in this case, ‘Used’ and “Not used” are 2 separately options. So, it should be:
    ‘Used’ option: Relevant cost is $5,800 (which have to pay for modifying)
    ‘Not used’ option: Relevant cost is $9,300 (= $12,800 – $3,500)
    – Cost for purchasing ‘Check 2’ system: $12,800
    – Gain on proceeded of ‘Check 1’ system: $3,500

    However, the explaination of BPP above is sum of the figures of 2 options. Why did they do that? Can anyone explain it to me more clearly, please?

    Thank you!!

    August 31, 2018 at 3:29 pm #470533
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    If they buy check 2 then they will pay 12,800.

    If the use Check 1 instead, then they will have a direct cost of 5,800 to modify it, and an opportunity cost of the lost sale proceeds of 3,500. So a total cost of 9,300.

    They will choose the cheaper option, which is to use Check 1, and the relevant cost is therefore 9,300.

    I do suggest that you watch my free lectures on relevant costing. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • The topic ‘Relevant cost issue’ is closed to new replies.

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on Activity Based Costing part 1 – ACCA Performance Management (PM)
  • Shabi on Activity Based Costing part 1 – ACCA Performance Management (PM)
  • Ark1 on Variance Analysis (part 4) – ACCA Management Accounting (MA)
  • EricObi on IAS 37 – Best estimate – ACCA Financial Reporting (FR)
  • Ken Garrett on The nature and structure of organisations – ACCA Paper BT

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in