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Hi sir ,
I am using the bpp revision kit 2019 edition and am having a doubt in question 93 relevant costing .
They choose higher of these two :
-126
-(3*35)
I dont understand why higher ?can you please explain me .
ThanksIf they did not use the materials in the special job then they would have the choice of either selling the materials or intend using them on another job instead of buying other material.
Selling the materials would get them 3 x 35 = $105. Using them on another job would save them $126.
Therefore if they were not doing the special job they would choose to use the materials on another job and save $126 (because it is better that selling them for only $105).
So……if they do use the materials on the special job then they are losing the $125 they would otherwise have saved, and this is the relevant cost.
Have you watched my free lectures on relevant costing? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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