Question: need help on this asap please Question 4 Standard limited is considering the acquisition of the warehouse next door to expand capacity. The warehouse costs
Question 4 Standard limited is considering the acquisition of the warehouse next door to expand capacity. The warehouse costs 140,000 to buy. The cost of the existing warehouse was 80,000 but it would now sell for 120,000. Fittings in the existing warehouse will be sold for 5,000 and a new refit for both warehouses together will cost 20,000. The cost of the refit will be depreciated at a rate of 4,000 per annum. The new warehouse will be depreciated by 7,000 per annum. The employment cost of the manager of the existing warehouse is 30,000 per annum. He will spend half his time on the new part of the expanded warehouse. An additional part-time assistant will be employed at a cost of 12,000. Heating and lighting for the new warehouse space will cost 6,000 per annum but there will be a saving of 1,000 on the fixed costs of the heating and lighting contracts for the existing warehouse. Required: a. Explain the meaning of relevant costs. marks) (2 Should Standard Ltd acquire the warehouse next door? Explain your decision using relevant costing. (18 marks) Total: 20 marks
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
