Q6: (Chapter 2 - Relevant Costing) 1) A company has an inventory of 1,250 assorted parts for a line of missiles that has been discontinued. The inventory cost is 71,000 and it is no longer used. The parts can be either (a) re-machined at total additional costs of 34,200 and then sold for 41,000 or (b) sold as scrap for 6,500. Which action is more profitable? Show your calculations (3 marks) 2) A truck, costing 121,000 and uninsured, is wrecked its first day in use. It can be either(a) disposed of for 10,000 cash and replaced with a similar truck costing 114,000 or (b) rebuilt for 96,000, and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations (3 marks) 3) Matilda Engineering Ltd is tendering for a contract that will require the use of 350 units of Component KX. This component is not normally used by the business, however, 140 units are currently held as inventories following a cancelled order. These units cost the business 85 each. The business has no other use for these units and so it is considering selling them for 46 each. The current replacement cost of the units is 110 each. What is the total relevant cost of Component KX for the purposes of the contract tender? (3 marks) 4) MM Consultancy Service has been asked to quote a price for a contract that will take two weeks to complete. Information relating to staffing for the contract is as follows: Basic Grade of staff Hours required rate/hour Manager 80 45 Senior Analyst 50 30 Junior Analyst 30 20 A shortage of managers means that the necessary staff to undertake the contract would have to be moved from other work that is currently generating a revenue of 150 per hour. Senior analysts are currently being paid their normal salaries to undertake work suitable for junior analysts. If the relevant members of staff are moved to work on the contract, junior analysts will have to be employed for the period to replace them, however junior analyst will only work if overtime of 20% is paid. The junior analysts actually needed to work on the contract will be specifically employed for the period of the contract. What is the total relevant cost of wages for the contract? (3 marks) (Total: 12 marks)