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HI JOHN SIR, how r u? i am trying to contact you for the last 5,6 day? R u ok?
A business has opportunity to bid for a contract for which material is available currently in stock at book value of 1000 although if it were to be used on the contract under consideration it would have to modify at a cost of 100. there is no other use for the component held in stock. The alternative is to purchase a new component that is exactly what is required at a cost of 1050.
what is relevant cost of using the material.Plz john sir guide me. i could not understand it.
waiting for your reply
I don’t know where you have been trying to contact me, but I answer all the questions in this forum with one day!
The book value of the inventory is not relevant – it is a sunk cost in that we have already bought the material whether or not we use it for the contract.
Therefore we have two choices, either modify the existing material which will mean spending 100. Or alternatively buy new material which will mean spending 1050.
We would choose the cheaper of the two choice, and therefore the relevant cost is 100.Thanx john sir, i got it. john sir i was contacting to you on ma2 forum. i think i could not properly use the forum. but thanx again john sir
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