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Sir can you tell relevant costing for a material which is not used for the core activity. It has a scrap value and it is can also be used in an alternative job (other than main production).
I think I have asked you before but could not find that please tell again.
If not used on the main production, it would either be sold for scrap (yielding it’s NRV) or it would be used for the alternative job, where it would earn sales less labour and variable overheads. The company would choose whichever of those is higher, so if used in normal production the it would cost the company the higher of those two amounts.
Sir. Like we deal alternative job in labor (old contribution + new job labor cost). Why we are not dealing same in material?
I mean to say alternative job should be valued as old contribution + new job material cost.That is effectively what I said. Either:
Sales – Labour – Variable overhead
Or
(Contribution) + cost of material = (Sales – cost of material – labour – variable overhead) + material = Sales – Labour – Variable overhead
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