relevant costing — OpenTuition Forums

Cchristine7113y ago

Hi, whether some one can help to identify the following are relavant or not relavant :
Let said a machinery cost 40k , depreciated 10k p.a., could be scrapped for 8k, currently using and will expected cash flow is 15k.
Knowing that cost and depreciation will not the concern of relavant costing but how about scrap value of 8k ?
Please advice.
Tq.
Christine

Sseagoat13y ago#1

Scrap value is an opportunity cost it is therefore relevant.

Cchristine7113y ago#2

Thanks Seagoat, one more query, how about replacement cost for the machine let said 50k , will replacement cost consider too ?

Sseagoat13y ago#3

Replacement cost will 50 k but less the scrap value of 8k so 42k.

Maybe the machine could be repaired. If the cost of repair is less than 42 then it is worth to repair rather to replace.

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