Tham khảo tài liệu 'pearson education of management accounting_2', kinh doanh - tiếp thị, quản trị kinh doanh phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 42 CHAPTER 2 RELEVANT COSTS FOR DECISION MAKING Activity A business is considering making a bid to undertake a contract. Fulfilment of the contract will require the use of two types of raw material. Quantities of both of these materials are held by the business. If it chose to the business could sell the raw materials in their present state. All of the inventories of these two raw materials will need to be used on the contract. Information on the raw materials concerned is as follows Inventories item Quantity units Historic cost unit Sales value unit Replacement cost unit A1 500 5 3 6 B2 800 7 8 10 Inventories item A1 is in frequent use in the business on a variety of work. The inventories of item B2 were bought a year ago for a contract that was abandoned. It has recently become obvious that there is no likelihood of ever using this raw material if the contract currently being considered does not proceed. Management wishes to deduce the minimum price at which the business could undertake the contract without reducing its wealth as a result. This can be used as the baseline in deducing the bid price. How much should be included in the minimum price in respect of the two inventories items detailed above The relevant costs to be included in the minimum price are Inventories item A1 6 X 500 3 000 B2 8 X 800 6 400 We are told that the item A1 is in frequent use and so if it is used on the contract it will need to be replaced. Sooner or later the business will have to buy 500 units currently costing 6 a unit additional to those which would have been required had the contract not been undertaken. We are told that item B2 will never be used by the business unless the contract is undertaken. Thus if the contract is not undertaken the only reasonable thing for the business to do is to sell the B2. This means that if the contract is undertaken and the B2 is used it will have an opportunity cost equal to the potential proceeds from disposal which is 8 a unit. Note that .
