Which cost is relevant present cost or replacement cost

Assignment Help Cost Accounting
Reference no: EM132842

Question :

A spare parts supplier is thinking of building a car from the parts he has in his yard. He does not expect any reward for his labor but needs to know what costs he could include for the materials. He has provided the given information:

  • A chassis was bought for £100 and has no scrap value.
  • A reconditioned engine can cost £375. Therefore, an old engine was bought for £50. It will either be sold in its present condition for £225 or additional parts costing £250 could be bought to bring to bring the engine to an equivalent standard to the reconditioned one.
  • Tyres costing £180 need to be purchased.
  • Paint is in stock at a cost of £60 but it can need to be replaced at its current price of £70 this is from the instructor:

Cost of materials to prepare a car based on given information. Hint on the first bullet - "chassis bought for 100" is this relevant? For example: is the chassis a relevant cost to be counted? What does the text provide about sunk costs (this is important), cost with no future cash flow and items that have no scrap value. Is this type of material relevant when you are trying to check relevant costs? This is a simple cost identification problem. Approach - read the cost information - refer to the text to evaluate if the type of cost is relevant. Prepare a cost column and a description column - total the cost column and you have relevant costs. HINT: which cost is relevant present cost or replacement cost?

Reference no: EM132842

Questions Cloud

Requirement for a code of ethics in the civil service : Requirement for a Code of Ethics in the Civil Service
Purpose the journal entry for blaha to record the impairment : Purpose the journal entry for Blaha to record the impairment of its goodwill at the end of 2013.
Purpose a horizontal analysis of the income statement data : Purpose a horizontal analysis of the income statement data
Describe term public relations research : Describe term Public Relations Research
Which cost is relevant present cost or replacement cost : Which cost is relevant present cost or replacement cost
Determine the potential value or accounting treatment : Determine the potential value or accounting treatment for such future development efforts.
Explain that the organization is an open system : Explain that the organization is an open system and it is affected by the environment Distinguish the two types of environment ,i.e, the internal environment which is mainly the organizational culture
Explain four types of supply chains : Explain four types of supply chains
Evaluate kens gross income : Evaluate Kens gross income

Reviews

Write a Review

 

Cost Accounting Questions & Answers

  Describe what he must do to obtain the same cash flow

Describe what he must do to obtain the same cash flow as he could have gotten from investing in 1000 shares in the proposed levered firm

  Prepare a complete statement of cash flows

Prepare a complete statement of cash flows

  Perform the acl test

Perform the ACL test and prepare a report with your conclusions

  Compute the amount vernas pension expense

Compute the amount Verna's pension expense for 2013 and prepare the related journal entries.

  Evaluate the business products

Would Sweet Products bid on the Red Sugar Candy business at $20 per case

  Evaluate the maximum profits

Evaluate the maximum profits that Greentown can earn and the customer mix and quantity by which that profit will be achieved.

  Write the journal entries using the equity method

Write the journal entries for 20X2 on BID's books related to its investment In TIC Corporation, using the equity method.

  Determine mary''s and larrys bases in these assets

Determine Mary's and Larrys bases in these assets

  Evaluate the cost of the ending inventory

Evaluate the cost of the ending inventory of three methods

  Evaluate federal income tax return

Evaluate federal income tax return

  Evaluate the amount of translation adjustment

Evaluate whether the companys foreign operations have a predominant functional currency

  Determine the potential value or accounting treatment

Determine the potential value or accounting treatment for such future development efforts.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd