Level 4 Synoptic- Ruby Dale

@RachaelH1997

Hi. How did you find the exam. Is it tough as you thought it would be

I'm guessing with what you've said you had a relevant costs type question. Without having the question or a simlar practice one I'm afraid I can't really help you with it as I can only guess at the syllabus area you were looking at.

Relevant costing would be a question similar to below (completely invented form the top of my head so might not be realistic):

Tube ltd is considering manufactoring a new product X for a limited period. X would be made on a machine that Tube ltd no longer uses that was purchased originally for £50,000 and could be scrapped for an income of £2,000 if not used and £0 if used in making X. £3,000 has already been used in researching product X and it is estimated that the total contribution of X over it's lifecycle would be £2,500.

Costs:
£50,000 original cost not relevant as would not have any impact on the decision
£2,000 from scrap is relevant because it's an opportunity cost (if you don't sell it you effectively lose 2,000)
£3,000 from research is not relevant because it has already been spent (sunk cost)

Revenue:
£2,500 relevant as it won't happen if not produced. (Might be presented as seperate costs and sales)

For decision:
2,500 - 2000 = 500 profit
From a financial persepctive it is worth persuing product X.