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-In your lectures(revision kit live), you have said that “there is 20 in inventory and we need to replace it”
– Why we should replace it? It is already in inventory we just have take it and use it. According to me, it is a sunk cost because this (20 x 8.20) has already been incurred.-Could you please clarify this point.
Dear sir,
I am having some issues concerning a relevant costing question(It is actually Dec 2014 question 3 note 3)Wood: 50 m at $8.20 per m
Notes(part of it): HL has 500 m in inventory but 480 m is needed to complete existing project. The remaining 20 m is not in use until 4 week time.-In your lectures(revision kit live), you have said that “there is 20 in inventory and we need to replace it”
– Why we should replace it? It is already in inventory we just have take it and use it. According to me, it is a sunk cost because this (20 x 8.20) has already been incurred.-Could you please clarify this point.
It is not note 3 – it is note 2.
Of course we need to replace it – it is being used regularly and will be needed in 4 weeks time. If it is taken for the new contract then new material will have to be bought in 4 weeks time.
You may have watched the ‘revision kit live’ lectures, but have you watched the main lectures that go through the whole syllabus for F5?
If you have then you should appreciate that if material is currently being used elsewhere in the business then it will need replacing at whatever the current cost is of buying the material.
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