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Dear Tutor, I have a question.
the contract requires 1500 and its 945 units are in stock.
The contract requires—-Units in stock—units need to be purch.–NRV—BK(HC or PC)–CP
1500 units——————–945———————555——————–2.75————————4.25This question is a bit confusing.In fact the contract will need 1500 and its 945 units are being used for this special order.
it says if inventory is not used it would be sold 2.75 but in fact the 945 is used and its current price is 4.25 and why i take 2.75?if i did not have this unit in my stock it would cost 4016.25 not 2358.75.Mentioning this inventory is not used it would be sold 2.75 does not make any sense its current market price in the market is as mentioned above,I just took NRV because of being mentioned “inventory is not used smth like that” but I think it does not make any sense
555*4.25$=2358.75-this is understandable
945*4.25=4016.25
945*2.75=2598.75
Sorry, but I cannot find the question you are referring to.
The ACCA specimen exam was replaced in 2016 and does not have this question.
The December 2014 past exam does not have this question either.If they 945 units would otherwise be sold, then the opportunity cost of using them in the contract is the 2.75 that they otherwise have received. Using the current price would make no sense – if they have them in inventory then they will not be buying them.
Watch my free lectures on relevant costing – I go through various scenarios with regard to using goods from inventory.
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