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@odean20 said:
Remember profit is not a relevant cost.Profit is non cash therfore not relevant
………………..profit is not relevant but company will have to buy 120 machine for that project.it means this existing machine can be used in the future.
@heychi said:
This question was tricky. Everyone had different answers for this.Anyway, my logic is that sales revenue isn’t really relevant I don’t think, but the contribution from the sales would be. Did the question say $110k was the contribution or just the sales?
Let’s say $110k is a relevant cost, then surely the $120k used to buy the replacement machine in the 1st place should have been as well..? Making a total of 230k. But this wasn’t an option. If it’s just sales of $110k and no further information, then wouldn’t it be a loss of $10k because the machine costs more?
The question said they needed extra capacity for the project, and already had in stock this machine they hadn’t used for 2 years which they could use for it. In my mind, it means they don’t use that machine often. So they could have resold it for the $90k had it not been for the project. They didn’t actually need to buy the new machine.
It would be really good if this question comes out in the next specimen/practice paper so I can see what the answer was. Anyway, If anyone passed F5 I don’t think they’d be interested in looking back anymore! Myself included haha.
………………………………it was written in the end that the machine can be used for other project which will give 110k profit
@heychi said:
I’d be interested to know what people put for:Characteristics of service question. I actually thought they were all characteristics lol.
Figures for the Variances – sales mix was favourable for me and sales quantity was averse.
Figures for profits: $301 or something and $449 for the other budgeted.
OAR – $146 per unit. yes exactly profits 301 and 449…..OAR $146 per unit
Did anyone get the same?
@odean20 said:
I think it was lowest figure between the current purchase price 120000 and the resal value of 9000. Therefore 90000it was 120000.if u resale the machine,u will have to buy a new machine which will cost 120000,making it replacement cost.