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thank you for coming back to me.
I understand, tax will inevitably have to be paid however given we are reversing the expenses back onto the income statement, would it not be more accurate and in line with providing more transparency in maximising shareholder weatlh if we were to account for the tax charge over those elements or better yet, reversing the tax benefit from the intial expense hit in the P/L?
Arent we then overstating our NOPAT or understating our tax.Im sorry I just realized that I hadn’t replied to your question, the exam date was Sept/Dec 2017)
Enjoy your vacation!
the question referred to was Stillwater services
I don’t understand the accident in timing. Im sure the owners of the project would know when to use the project’s capital.
I do see why EVA can be used in divisional appraisals but fail to see how it can be used to appraise investments when it is expected that managers only invest in projects whos return need to be higher than the cost of capital times the company whole capital employed
thank you for getting back to me
page 2 article part 2 says that directors should only invest in projects where the return of the project exceeds the company’s CE. Should it not be when it exceeds the capital employed for the project. Is this not otherwise too excessive?
Q24 of the BPP does not adjust the CE for depreciation and economic depreciation why not? Should it not add back the accumulated dep balance at beg of the year and deduct the economic depreciation?
Thank you very much
Forfeited my P1 which i had passed with 63 and now tremendously failed SBL. 4 hours exam from 11 till 15h00 is tough when you’re not allowed any food. Ill bring a baxter of glucose at my next sitting
Yes its an ltd. what they did is 14.3*(1-30%)= 10,01. Ill make sure to state the assumption.
thank youi just noticed what they did. They just split the formula into 2 parts.
Thank you.this is odd i can see 2 posts but cant see the answer when i open the post….I can only see mine….I am logged in
Hello
Tanks… But After having reread my question, this wasn’t what I initially had difficulties with. What I meant to write was. How can a receivables account have an open credit and closing credit …… But I understood why. If a customer returns a good out of the ten he bought (on credit), that good will be input on the credit side of the receivables account.
Thanks anyways joney
Hello Alfo,
I have not yet been able to answer your last question ” contribution of the limiting factor” since I’m still not yet on that chapter. However I have yet another problem maybe you or anyone else can help.
Why are the consultancy costs 2500 instead of 5500.
This what is given in the exercise:
“to complete the work the following costs would be incurred:
– Consultancy fees 4000. If the worked is not complete the consultancy’s contract would be cancelled at a cost of 1500.
What is the relevant cost for this part?
For me the 4000 are etra costs so, they should be included. The way I understand the 1500 is like this….I do not understand it another way.
The company and the consultancy firm have themsellves drawn a contract and the terms and conditions of the cntract in brief say: If we (company) finish the work you (consultant) will have 4000. If we do not, however far into the project we find ourselves, you (consultant) will receive 1500 less.
It is really important to understand the logic, to figure out what would really happen between two companies working with eachother. I hopefully have the logic…….. If you do come up with another logical answer that would contradict mine……please tell me. I cannot be sure enough!!!Thanks
thanks. When re-reading the layout of my message, I’m surprised you managed to understand anything. Yes the logic is to find variables which influence the cost of operation in the lorry business: weight & distance & time are infact the variables. Time*distance*weight = cost Any of the three variables will have an impact on the price.
As for the train business distance*empty seats = cost.As for chapter 13 I havet gone through that chapter yet. I’m afraid I won’t be of any help to you. But I’ll definately go back to your question once i’ve read through the relevant chapter. My next chapter is Budgeting on the BPP.
Till next timeyour absolutely right Alfo, only using the “weighted average system” would they need to give us the cost incurred in the previous month/process.
Furthermore the answer is also written as D on the answer sheet.
ThanksI have another question. Mainly problem of understanding or putting a “cost unit” into words:
And so I am currently undergoing immense frustration because I cant seem to understand the logic behind this very simple ratio.
Let us take the example of a company lorry that makes five deliveries in a week.Delivery Tonnes carried Distance Tonne/kilometres (cost unit)
(one way)
Kilometre
1 0.4 180 72 72*0.4
2 0.3 360 108 108*03
3 1.2 100 120
4 0.8 250 200
5 1.0 60 60
total: 560Costs of operating the lorry for this week were 840 dollars. So the cost per tone kilometre would be:
840/560= 1.5 tonne/kilometrethe book defines the “cost per tonne/kilometre as (the cost of carrying 1tonne of goods for one kilometre distance)
Do you have a clue on how to understand this “cost unit”
The way I understand, in order to allocate a cost onto a service u need to know who is using the service and/or what their main activities are.
Ex: Education Full-time student
Canteen number of meals served
passenger transport service Passenger/mile ( for this example I find it easier to understand. If a train travels 200 mile, during its travel it transported 400 passengers who came and left the train; 400/200 gives you 2 passenger/mile) These 2 passengers will cover the cost of operating the the train for a mile. So if the cost of running a train for mile (using elctricity) is 5 it’ll then be transfered on to the 2 passenger who will pay 2,5 + profit margin each. But there i devided not multiplied…. Im confused…helpforget I ever asked the last question……. boy i should really think 5 times before asking a question.
all the best
hey i have another question. 😉
regarding joint products. Using “sales value method”
When you want to calculate the profit of a main product A (for example) do you compare sales revenue with the cost of production of the sold units or the cost of production of the total units poduced ( including the ones that’ll end up in inventory). Because lets say we dont sell the remaining units (the tomatoes rott) it is best to measure profit as a comparison between cost of production of the entire MAIN products with sales revenue of units sold…………You have answered my question by asking yours. And I thank you.
1st: Look at how you calculate your equivalent units. How many have actually been started and and finished. How many units from the 14’000 units completed are “start-finish” units? 14’000 – 2000 = 12’000 (and not 13’000).
2nd: calculating value is : 51’000 / (2000+12000+3000) = 3
193’170 / (800+12000+900) = 14.1
Value of cl.wip => 3000*3 + 900*14.1 = 21’690
My problem was and actually still is….the wordings. For me the degree of completion applied for both “materials” & “conversion”. But when re-reading “All materials are input at the commencement of the process”, “All materials” = 100% completed for materials. One could say ” of course materials are input at the commencement of the process…….you nincampoop!!”, they do not come in at the end of a process (especially when we’re talking about raw materials, which in most cases we are)Let’s say X=Units which need to be sold
We know that Profit = SalesRevenue- (Total Fcost + Total Vcost)
=> S.Revenue is in other terms = number of units sold (which we don’t know) * (times) cost per unit
=> Revenue = 7*X
=> Total Vcost = 4.2*X
so => 6000 = 7X – ((56000+38000) + 4.2X)
6000 = 7X – 94000 – 4.2X
=> 2.8X = 100000
=> X = 100000/2.8 = 35714.28571 units which need to be sold (rediculous)
S.Revenue = 7 * the giberish on top (35714.28571) = 250000
Which isn’t equal to the 4 given answers.
It takes longer to explain than to understand
