- This topic has 8 replies, 4 voices, and was last updated 4 years ago by
.
- Posts
sip co specialises in refurbishing the inside of yachts and has been asked to quote on a relevant cost basis, for the refurbishment of a yacht called bow. the refurbishment will start in one week’s time. sip co has spent $100 obtaining the following information about the refurbishment:
the material required will be:
10 m of teaksip co has 5m of teak wood in inventory which cost $100/m and could be sold at a 5% discount on original cost. the teak is left from a previous job and is stained dark mahongany. the color of the stain required for bow, tan, is lighter and the costs of staining and sanding the teak are as follows:
sanding = $14/m
staining = $4.5/m
reset of staining machine, arising after each staining job is completed $80.
to ensure the color of the teak is consistent, all the teak for one job is stained at the same time and the staining cost is same irrespective of the age of the teak. to cost of purchasing new teak is $110/m. New teak can be stained the correct color for bow with no preparation.what figure should be included in the quote for the new teak ? the answer for the question is $1220
in the answer given they have done the following working, could you please explain why 4.5 * 10 is beig done instead of 4.5*5 as 5m of teak is being bought.
relevant cost = (5*109) + (5*110) + (4.5*10) + 80 = 1220
10m of teak is required, and all of it needs staining (obviously the new teak needs staining, but so does the teak from inventory because at the moment it is the wrong colour).
Hi sir
I did not understood the point you explanied.In the question it is stated clearly that the new teak can be stained with no preparation so that means we need to colour only the existing teak since purchasing of new 5m teak is inclusive of desired lighter colour.? so it is 4.5*5 (for old teak)Am i wrong sir.?
You are wrong. The question says that the new teak can be stained without preparation, but it still needs staining (it just does not need preparing).
okay okay now i got it sir I am vexed up from morning thank youu is the small word. So finally Since the qn specifies it can be stained and we know it has to stained we included 4.5*10 for old teak and new teak Am i right sir..?
Dear Sir in this above mentioned question while considering the relevant cost of labour do we have to consider the hourly rate they are paid at? my confusions that in the case of skilled labour whether the existing skilled labour or newly admitted ones the hourly rate has to be paid for the 100 hours which is a given.So can’t we just do that judgement based purely on the contribution lost and the extra cost to be spent on training?
Also Sir why can’t the $100 spent on obtaining the cost information be included in the quote? Is it because it’s sunk cost?
- You must be logged in to reply to this topic.