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BPP kit Newtown school ( incremental budget )

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › BPP kit Newtown school ( incremental budget )

  • This topic has 1 reply, 2 voices, and was last updated 11 months ago by John Moffat.
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  • Author
    Posts
  • August 23, 2021 at 9:17 am #632601
    wroheet
    • Topics: 8
    • Replies: 1
    • ☆

    Capital expenditure 65,000( actual cost ye 31 may 20X3) + 6%( inflation) 68,900( budget cost for ye 20X4)
    notes:
    The full $65,000 actual costs for the year ended 31 May 20X3 related to improvements
    made to the school gym. This year, the canteen is going to be substantially improved,
    although the extent of the improvements and level of service to be offered to pupils is still
    under discussion. There is a 0.7 probability that the cost will be $145,000 and a 0.3
    probability that it will be $80,000. These costs must be paid in full before the end of the
    year ending 31 May 20X4.

    ans :
    Expected capital expenditure [(0.7 × $145,000) + (0.3 × $80,000)] = 125,500

    Would you mind explaining this to me! please
    why $65000 not taken??

    August 23, 2021 at 4:32 pm #632636
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49993
    • ☆☆☆☆☆

    The $65,000 was the cost last year, but we are preparing the budget for this year 🙂

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