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relevant costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › relevant costing

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by tommy1989.
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  • August 25, 2020 at 2:02 pm #581925
    agnes222
    Member
    • Topics: 45
    • Replies: 17
    • ☆☆

    A company in the civil engineering industry with headquarters located 22 miles from London undertakes contracts anywhere in the United Kingdom.
    The company has had its tender for a job in north?east England accepted at $288,000 and work is due to begin in March 20X3. However, the company has also been asked to undertake a contract on the south coast of England. The price offered for this contract is $352,000. Both of the contracts cannot be taken simultaneously because of constraints on staff site management personnel and on plant available. An escape clause enables the company to withdraw from the contract in the north?east, provided notice is given before the end of November and an agreed penalty of $28,000 is paid.

    The following estimates have been submitted by the company’s quantity surveyor:

    (3) The plant which would be needed for the south coast contract has been owned for some years and $12,800 is the year’s depreciation on a straight?line basis. If the north?east contract is undertaken, less plant will be required but the surplus plant will be hired out for the period of the contract at a rental of $6,000.

    Sir the aforementioned paragraph is an extract from a question mentioned in Kaplan. Now i want to understand that why did we not add $6000 to north-east contract? and why just deduct 6000 as an opportunity cost from south coast contract cost statement??

    I uderstand why the latter treatment is right, but i want to know why can’t we add 6000 to north east contract and show it as additional revenue?

    thanks!

    August 25, 2020 at 2:29 pm #581928
    tommy1989
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    Hi everyone, I have no idea how to start new thread so i join here.
    ? an income statement for March 2019 based on marginal costing principles.
    ? an income statement for March 2019 based on absorption costing principles.
    The following information is available for February 2019
    .
    Fixed production overheads for the period were £210,000.
    Fixed administration overheads were £54,000.
    Product X Product Y
    Production (units) 5,000 3,500
    Sales (units) 4,600 3,200
    Opening stock (units) 0 0
    Financial data for Product X Product Y
    Unit selling price £ 180.00 £ 150.00
    Unit cost:
    Direct materials £ 30.00 £ 24.00
    Direct labour £ 36.00 £ 24.00
    Variable production overheads £ 24.00 £ 16.00
    Variable selling overheads £ 2.00 £ 2.00

    Anyone would help with this exercise? :))

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