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Dear John,
How are you?
I hope you are great,
As per Q#124 kaplan kit exams i have the following data related to material A,
Appler needs 500 kg of me material for the compound but has 200 kg in stock present. The Stock items were bought for 3 Months ago for $5 Per kg but have suffered 10% shrinkage since that date. Material A is not regularly used in the business and would have to be disposed of at a cost to Appler of $400 in total. current purchase price of material A is $6.25 per kg.
the solution mentioned in kaplan is Material A relevant cost is
Material A:
stock – saved disposal cost = $(400)
bought 300 Kg @6.25 kg = 1875
Net cost $1475
Actually sir, my question is why doesn’t take the shrinkage percent into consideration I mean he must buy more than 300 kg not only 300 kg as the old stock has suffered shrinkage .Thank you in advance
If they actually have 200 kg in stock, then any shrinking must already have happened. So they will use the 200 kg that are actually there and have to buy another 300 kg.
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