[Melchizedek]

I thought it could be flexed when analyzing variances. Example 1 of Chapter 13 in the opentuition lecture notes captures this in the model answer.

[Melchizedek]

Thanks very much for the explanation.

[Melchizedek]

Hi John,

I found this question and I am having trouble getting the answer right.

A company has been asked to quote for a special contract. The following information about the contract has been given.
Material X: Book value $5.00/kg, Scrap value $0.50/kg, Replacement cost $5.50/kg

The contract requires 10kg of Material X. There are 250kg of this material in inventory which was purchased in error over two years ago. If Material X is modified, at a cost of $2/kg, it could be used as a substitute for material Y which is in regular use and currently costs $6/kg.
What is the relevant cost of the materials for the special contract?

[Melchizedek]

Hi, Can it be said that traditional absorption costing tends to over-estimate overhead costs for high volume products?

[Author]

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