- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
Hi Sir,
A company is evaluating a project that requires 4,000Kg of a material that is used regularly
in normal production. 2,500 kg of the material, purchased last month at a total cost of $20,000 are in stock. Since last month the price of the material has increased by 2.5%.Can I know what is the total relevant cost of the material of the project?
Thank you Sir
In future, please do not simply set test questions and expect an answer! You must have an answer in the same book in which you found the question, and so you should ask about whatever it is in the answer that you are not clear about and then I will try and help.
Because the material is used regularly, the 2,500 kg in inventory will need replacing at whatever the current price is. The remaining 1,500 kg required will obviously have to be purchases.
So all 4,000 kg will have a relevant cost of 20,000/2,500 + 2.5% = $8.20 per kg.I suggest that you watch my free lectures on relevant costing. The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
Hi Mr Moffat,
Thank you for your assistance on this MCQ.
Sorry for asking the question directly.
Regards,
- The topic ‘Relevant Cost for Materials’ is closed to new replies.