Short-term Decision making – Relevant Costing – ACCA Performance Management (PM)
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Hello sir,
Point 5. Given that the machine has 4000hrs available capacity, why are we recognising the whole 6000hrs*3=$18 000 has the relevant cost. And not 2000hrs*3=$6000 cost and lost contribution of 2000*2=$4000?
Because we will have to pay for the hours that they work. Spare capacity means that they can work more hours if we want them to buy we will still only pay them for the hours that they do work.
Hi sir, may I ask a simple question? If the question stated that:
Material A (9,000 kg RM26 per kilo) at RM 234,000
The note for this cost is the Material is in continual use and there are 3,000 kg of material in stock, which was purchased at RM26.00 per kg. The current cost of the material is RM32 per kg.
How should I recognise the relevant cost? Is it 6000kg x RM32 per kg?
Because it says in continual use, I’m not sure shall I recognise the relevant cost as 9000kg x RM32 or just 6000kg x RM32 because there are 3000kg of material in stock.
Because it is in regular use the items used from inventory will need replacing, so the relevant cost is all 9000kg at RM32.
Thank you, Sir, for your response.
What about this one :
Unskilled labour (8,000 hours RM7 per hour) at RM 56,000
The note for this cost is Unskilled labour is only employed when such workers are required.
If they are only employed as required then the relevant cost is the cost of paying them.
Alright, Sir. I got the idea already. Thank you so much.
You are welcome 馃檪
You are welcome 馃檪
thank you so much for this explanation sir, this was really helpful