Hi sir, in the sum to calculate relevant cost with regard to computerised control system they have choosen between cost of buying swipe 2 $10,800 and cost of converting swipe 1 $3000+$4600=7600 whichever is less. However, we should consider the relevant cost as gollows:
Savings in costing of purchasing swipe 2= 10,800
less: cost of conversion. 3000
less: opportunity cost of not selling 4600
That is net savings in costing is 3200.
Please clarify the same. Thanks in advance.
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T co.
10y ago#1The choice is:
Either buy a new Swipe and pay 10,800
or
Modify the old Swipe at a cost of 4,600 and have the opportunity cost of 3,000 of not being able to sell the old Swipe. i.e. a total of $7,600
They will choose the cheaper of the two options and therefore the cost is $7,600.
The examiners answer is correct.
I do suggest that you watch my free lectures on relevant costing.
Our free lectures are a complete course for Paper F9 and cover everything needed to be able to pass the exam well.
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