Your company regularly uses material X and currently has in inventory 500 kg for which it paid $1,500 two weeks ago. If this were to be sold as raw material, it could be sold today for $2.00 per kg. You are aware that the material can be bought on the open market for $3.25 per kg, but it must be purchased in quantities of 1,000 kg.
What is the relevant cost of 600 kg needed to be used in a job for a customer?
The correct answer is: $1,950.
The material is in regular use so the relevant cost is 500 kg in inventory at the replacement cost of $3.25. The other 100 will need to be purchased at a cost of $3.25.
The total is therefore 600 × 3.25 = $1,950.
If you selected $1,325 you valued the inventory at their resale value. The items are in regular use so they would not be resold.
$1,825 values the items at their original purchase price but this is a sunk cost.
$3,250 is the cost of the full 1,000 kg that must be purchased. However, as the material is regularly used it can be kept in inventory till needed.
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A government is trying to assess schools by using a range of financial and non-financial factors. One of the chosen methods is the percentage of students passing five exams or more.
Which of the three Es in the value for money framework is being measured here?
The following statements have been made about measuring performance in not-for-profit organisations:
(1) Output does not usually have a market value, and it is therefore more difficult to measure effectiveness.
(2) Control over the performance can only be satisfactorily achieved by assessments of ‘value for money’.
Which of the above statements is/are true?
The senior manager is suspicious of a local manager’s accounts and thinks that the profit performance may have been overstated.
Which of the following would be a plausible explanation of an overstatement of profit?
Which of the following statements regarding standard setting is correct?
When setting performance measurement targets it should be considered that there is the possibility that managers will take a short term view of the company and may even be tempted to manipulate results in order to achieve their targets.
Which of the following would assist in overcoming the problems of short-termism and manipulation of results?
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