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Push co taken from Bpp revision kit
Push Co would also need a computerised control system called Swipe 2. the current market price of Swipe 2 is 10800 although T Co has an older version of the system, Swipe 1, in inventory, which could be modified at a cost of $4600. T Co paid $5400 for Swipe 1 when it ordered it in error two months ago and has not other use for it. The current market price of Swipe 1 is $5450, although if Push Co tried to seel the one they have, it would be deemed to be used and therefore only worth $3000
—————————————————The lower of
Replacement Cost———————————————————–NRV
——-$10800——————————————————————7600
——————————————————————————the higher of
———————————————————————NRV——————-Economic Value
—————————————————————(3000+4600)=7600—————-5450then if I do this the way like below then why we can not deduct modification cost from the Swipe 2 current market price?
10800-4600modification cost=6200?
Albrecht taken from Becker
Albrecht has received a request to make a special version of one of its basic products. This special version will use 2000 units of material X
Material X is no longer used by Albrecht but there are 2000 units left in inventory that had been purchased at $ 4 per unit. The current purchase price is $4.75 per unit. Albrecht believes it could sell material X for £ 3 per unit. However, material x is similar to material Y that is currently in use by Albrecht and can be purchased for $6.50 per unit. It oculd use material X in place of Material Y–however, it would cost $2.75 per unit to modify material X so that it could be used in place of Material Y
—————————————————The lower of
Replacement Cost———————————————————–NRV
——-$6.50——————————————————————5.75
——————————————————————————the higher of
———————————————————————NRV——————-Economic Value
—————————————————————(3+2.75)=5.75————–4.75why here modification cost is deducted here from material Y’s current market price ?
6.50-2.75=3.75
Why we deduct modification cost in Albrecht example and why we added modification cost in Push co?
i reconciled these two examples to remove my confusion.
Don’t simply learn rules. The questions are deliberately designed to check that you understand.
For the Push question, they have two choices.
Either buy a Swipe 2 and paying $10,800.
Or, use the Swipe 1 and lose $3,000 they would otherwise have sold it for, and pay $4,600 to modify it. A total of $7,600.
They will do the second option and the relevant cost is therefore $7,600.I cannot comment on what Becker has done in the other question because I do not have Becker books.
Becker are no longer an ACCA approved publisher because they do not exist in the UK any more and no longer publish books.
(If you downloaded an old book from a website, then appreciate that it is illegal and against ACCA regulations because of copyright rules.)
I cannot comment on what Becker has done in the other question because I do not have Becker books.
Becker are no longer an ACCA approved publisher because they do not exist in the UK any more and no longer publish books.
(If you downloaded an old book from a website, then appreciate that it is illegal and against ACCA regulations because of copyright rules.)
Dear tutor, Relevant cost for Machinery has not clearly explained in Bpp study text book, Then how we can learn about relevant cost for explanaion. Anyway
- The topic ‘Relevant cost comparison between Push co and Albrecht’ is closed to new replies.