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A material costs $6.50
There is a associated note with the material cost which states as follows:
The material figure above includes a charge of $2 for a polymer that is currently in stock and can be used for this project. Each personal monitoring device requires 200g of the polymer and the charge is based on the original cost of $1 per 100grams of the polymer. It is a material that is currently used in other areas of the business and the cost of replacing the polymer is $1.50 per 100 grams. The polymer could easily be sold at a price of $1.25 per 100 gram.
Sir can you please guide me as to how to arrive at the correct material cost.
Thanks
This could not be asked in the Paper F9 exam!
It is a relevant costing question that is in the Paper F5 syllabus, but not in the Paper F9 syllabus.
(But why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they contain exam standard questions together with answer and explanations).
It has been asked in questions of f9 study text.
They have mentioned the solution but I am struggling to select the relevant cost from the data provided.Will relevant cost will not be asked in F9 paper now??
I have no idea why on earth it is in your F9 Study Text, because as I wrote before it is examined in F5 and has never been examinable in F9 🙂
(About 20 years ago, there was an exam testing what is now F5 and F9, but then it was split into the two papers!)You can effectively be asked tiny bits of relevant costing when arriving at the cash flows for an NPV question, but not full relevant costing.
I do cover this in my free lectures anyway – the lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.Since the material is in regular use, then if they use it in the project it will need replacing at a cost of $1.25 per 100gm. Therefore the cost is 2 x 1.25 = 2.50. They are currently only including 2.00 in the cost of 6.50, but they should be including 2.5 instead. Therefore the total cost is 7.00.
Do watch my free lectures 🙂
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