Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Relevant cost in F9
- This topic has 5 replies, 2 voices, and was last updated 8 years ago by
John Moffat.
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- December 31, 2016 at 2:38 am #364689
Dear tutor!!!
Can u explain for me this question in bpp kit.
” LW has a half empty factory on which it pays $5,000 pa rent. If it takes on a new project, it will have to move to a new bigger factory costing $17,000 pa and it could rent the old factory out for $3,000 pa until the end of the current lease. What is the rental cost to be included in the project appraisal?”
What i am thinking is like this:
$5,000 is that we could save if move to a bigger factory
$17,000 is a new rental as cash outflow
$3,000 is cash inflowThe answer is :
17,000+5,000-3,000-5,000= 14,000Why should we take into account 5,000?
It’s just 17,000-3,000 = 14,000Can u explain for me why add +5,000 and -5,000 in the bpp’s answer?
December 31, 2016 at 9:11 am #364707Can u answer me pleAseeeeeeee
December 31, 2016 at 3:16 pm #364720Answer me please sir!!!!
December 31, 2016 at 5:38 pm #364728Sorry – it is New Year and I am away from home until tomorrow.
I will answer you tomorrow evening if you remind me.
January 1, 2017 at 3:45 am #364738Yes and happy new year
Can u answer me now?January 1, 2017 at 4:35 pm #364774But it is not relevant and so there is no need to add 5,000 and then subtract 5,000 🙂
I would not do that and there is absolutely no need to do that in the exam. You will still get full marks for ending up with the 14,000!
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