16 Using relevant costs to arrive at a price The principles of relevant costing were met in paper F2. Here relevant costs are used to arrive at a minimum tender price for a one-off tender.
The use of relevant costs is only suitable for a one-off decision since:
§ Fixed costs may become relevant in the long run
§ There are problems estimating incremental cash flows
§ There is a conflict between accounting measures such as profit and this approach.
Illustration 17 – Using relevant costs to arrive at a price
Mr. Smith has been asked to quote a price for a special contract. He has already prepared his tender but has asked you to review it for him.
He has pointed out to you that he wants to quote the minimum price as he believes this will lead to more lucrative work in the future.
Mr. Smith’s tender
$
Material:A 2,000 kgs @ $10 per kg20,000
B 1,000 kgs @ $15 per kg15,000
C 500 kgs @ $40 per kg20,000
D 50 litres @ $12 per litre 600
Labour:Skilled 1,000 hrs @ $25 per hr25,000
Semi-skilled 2,000 hrs @ $15 per hr30,000
Unskilled, 500 hrs @ $10per hr5,000
Fixed overheads 3,500 hrs @ $12 per hr42,000
Costs of preparing the tender:
Mr. Smith’s time1,000
Other expenses500
Minimum profit (5% of total costs)7,725
Minimum tender price166,825
Other information
Material A
§ 1,000 kgs of this material is in stock at a cost of $5 per kg.中 华 考 试 网
§ Mr. Smith has no alternative use for his material and intends selling it for $2 per kg.
§ However, if he sold any he would have to pay a fixed sum of $300 to cover delivery costs.
§ The current purchases price is $10 per kg. |
发表于 2012-2-23 17:09:42
