The relevant costs of the adjusted proposal (to make space for Alison's coffee stand, 3sqm of the store room and 3sqm of the baked goods section), for the month of June and July should be evaluated.You are required to DISCUSS each statement in terms of relevant costing principles. Give detailed reasons whether the statement is correct or incorrect.

(a)Rental received from Allison for June is a relevant inflow of R12 500.(1 mark)

(b)Lost contribution for June in terms of the three divisions (baked goods, cheese and cured-meats) will be an outflow and is calculated as follows: R6 546 + R19 768 + R3 986 = R30 300.(2 marks)

(c)Assume the total contribution for the baked goods for May is R45 975.The lost contribution for baked goods for June is a relevant outflow of R6 896. (4 marks)

(d)Additional sales (15% extra on baked goods) for June will be a relevant inflow calculated as follows: {(115 000*1.15)/2} * 0.7(4 marks)

(e)Additional sales for cured meats for July are a relevant inflow and is calculated as follows: (R180 000 * 1.05) = R189 000(2 marks)

(f)The wage of the cashier (note 2) is a relevant inflow for June and the amount is R3 500.

(2 marks)

(g)The costs for the breaking down and the rebuilding of the wall and for the survey is irrelevant for the decision as both costs are sunk costs.(2 marks)

(h)The fixed part of electricity (R15 000) is irrelevant for June.(1 mark)

(i)There should be a part of overheads allocated to Allision which should be shown as a relevant inflow in terms of the relevant costs for June and July.(1 mark)

(j)The savings in terms of the permanent staff (4 employees) should be shown as in inflow as the Bakery is closed for first part of June.(1 mark)

(k)List three qualitative issues that you should concern before signing the final contract with Allison.(3 marks)

LOGIC AND NEAT PRESENTATION(2 marks