Erickson Company is considering pricing its 5,000 litres petrol tanks using either variable manufacturing or full product costs as the base. The variable cost base provides a prospective price of R3,000 and the full cost base provides a prospective price of R3,050. The difference between the two prices is:

 

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As an independent suitably qualified financial reporting expert you are required to respond to the following matters that have been raised by the asset manager of Jud Limited seeking for your expert advice. The company has 31 December year end. Ignore all forms of taxation in answering. Plant Historic cost (1 January 2021) Carrying amount (31 December 2022) - depreciated historic cost Fair value (1 January 2023) R 8 000 000 4 800 000 6 000 000 Additional information: The company depreciates plant at the rate of 20% per annum on the straight line basis, to nil residual values. The company releases the revaluation surplus reserve directly to retained earnings as it becomes realised. The company revalued its plant on 1 January 2023, in terms of IAS 16. Net replacement method is used by the company. The entire plant was disposed of by scrapping on 01 January 2025. New plant was brought into use on 2 January 2025. As an independent suitably qualified financial reporting expert you are required to respond to the following matters that have been raised by the asset manager of Jud Limited seeking for your expert advice. The company has 31 December year end. Ignore all forms of taxation in answering. Plant Historic cost (1 January 2021) Carrying amount (31 December 2022) - depreciated historic cost Fair value (1 January 2023) R 8 000 000 4 800 000 6 000 000 Additional information: The company depreciates plant at the rate of 20% per annum on the straight line basis, to nil residual values. The company releases the revaluation surplus reserve directly to retained earnings as it becomes realised. The company revalued its plant on 1 January 2023, in terms of IAS 16. Net replacement method is used by the company. The entire plant was disposed of by scrapping on 01 January 2025. New plant was brought into use on 2 January 2025.

Answer rating: 100% (QA)

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