Relevant costing (W1)
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6 Terms
How do we account for materials out of stock?
It is the number of materials needed x purchase price
How do we account for materials in stock that are regularly used?
The number of materials needed x replacement cost
How do we account for materials in stock that are not regularly used?
The number of materials needed x NRV ( higher of VIU & fair value less costs of disposal)
How do we account for labour that has spare capacity?
Adjustable = Labour cost
Non adjustable = 0
How do we account for labour that has full capacity?
Seen as an opportunity cost
Fixed = contribution lost
Variable = contribution lost + labour cost
What are some qualitative factors that must be taken into consideration before choosing to accept/reject a tender?
If there is probability of future work
Is there prestige from being associated with that organisation
Make sure the same price is not expected in the future ( will not affect general market conditions)
Include a profit margin
Make sure customers aren’t upset
Environmental conditions
If quantity is being put over quality