Home For AAT student members AQ 2016 Professional Diploma in Accounting Synoptic assessment - Professional

Osborne Books - Level 4 synoptic workbook, page 29, task 4

candybr2017candybr2017 Registered, AAT Student Posts: 2
Hello, can anyone please explain the calcluation for task 4 in Level 4 synoptic workbook, page 29?
i don't understand why the cash flow amount has to minus 60K. The answer shows in the book for the cash flow in Y1 is (275k+50k-60k)=265K

I have attached the quesiton.



  • Pian32Pian32 MAAT Posts: 337
    It's beacuse the £60,000 is overall irrelevant to the decision and is therefore not included in the considered cash flow.

    If the plant is open:
    £275,000 is made including £50,000 in management cost

    If the plant is closed
    The management cost still occurs and £60,000 is gained at another site.

    Therefore cash flow
    =£275,000 (made from being open) + £50,000 (cost occurs either way) - £60,000 (Income that would occur even if closed)
    AAT Level 4, MAAT
    ACCA in progress
    F4- Passed Aug 2020
    F5- Planned for Dec 2020
    F6- Passed Sep 2020
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