december 2011 question 1 — OpenTuition Forums

MMaciek12y ago

Hi, i have question related to point 4. Why this cost paid to third party is not included as relevant cost? Examiner answer is: This is a cost paid directly by Push Co to a third party. Since it is not a relevant cost for T Co, it has been excluded i dont get it since it is clear that this cost would be incurred only if contract is undertaken.. please help thank you

John MoffatTutor12y ago#1

The cost will only be incurred if the contract is undertaken, but we are trying to calculate the costs that will be incurred by T Co.. When T quotes a price for the job it has to cover all the costs that T will incur. Since the cost in point 4 is not incurred by T Co. it is not included in the list of T's costs. (Obviously it means that Push ends up paying more - but we are not asked how much Push will end up paying to everyone)

MMaciek12y ago#2

thank you

John MoffatTutor12y ago#3

You are welcome :-)

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