Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Determine Opportunity Costs
A company has material B in stock that originally cost Shs. 5000 for the 1000 Kshs in stores. The material is missing over from an old purchase order. The company is still considering employing it on contract X. The alternative course of action to utilizing material on contract X is as:
a) 600 kg could be employed in contract Y instead of buying similar material at Shs. 3 per kg.
b) A further 250 kg could be sold like scrap at Shs. 1 per kg
c) The remainder will have to be disposed at a cost 50 pence per kg
Required
Prepare a summary that shows the opportunity cost of utlizing material B on contract X
Solution
The information may be presented in more than one way. An approach that focuses on each individual cash flow for each alternative is useful where the decision making condition becomes more complex, since it adopts a detailed analysis, that is easy to follow. Alternatively, the net costs and benefits may be summarized for employ in the alternative option decision.
a) Showing all relevant cash flows
Accepted Contract
Reject the contract
X
Cash in flows
Scrap sales (250 kg x Shs. 1.00)
250
Nil
Cash outflows
Contract Y purchases (600 kg x Shs. 3)
1800
-
Disposal cost (150 kg x Shs. .5)
75
Net cash inflow/outflow
(1800)
175
The opportunity cost net outflow if material B is essential on contract X is Shs. 1975 . Utilizing a net costs and benefits summary if material B is used on contract X:
Shs.
Benefits
Disposal cost avoided
Less costs
Contract Y purchases
1,800
Scrap sales foregone
2,050
Opportunity cost
1,975
XYZ Inc. plans to raise $5,000,000 external financing through issuing bonds, and is considering two options: regular bonds and zero couple bonds. The regular bonds will have coupo
We have earlier explained working capital by total current assets less current liabilities. It, in other words, implies that all the assets held through the business along with the
what is planning and what part of this activity would you describe as planning in the situasion above
Build-Rite construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, s
The sunshine tomato soup shippers produce tomato soup at three west coast canneries in Bakersfield, phoenix, and Eugene. The soup is shipped to four regional warehouses. Due to hig
how the NHS might use ABC to (a) produce ‘product costs’ for services, and to (b) evaluate the internal efficiency, quality and profitability per product or service line. Both bene
You have just been assigned to replace the current Project Manager for a very important project. You were provided a WBS for the project planning that had already been conducted,
Cost Benefit Approach - Terms Used in Cost Accounting Is the primary criterion for selecting with alternative accounting approaches? There is a direct relationship in a co
A local delivery company has purchased a delivery truck for $15,000. The truck will be depreciated under MACRS as a five year property. The trucks market value (salvage value)
Variable Overhead Variance This is the dissimilarity between the variable overheads absorbed and the actual variable overheads warned. Therefore it can be described as the und
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd