Question $3$

Dodo Sdn Bhd ordered from Koko Sdn Bhd a piece of specialised heavy equipment

for its operations.

Details of cost incurred are:

RM

Purchase price $380,000$

Import duty $4,800$

Engineer$$s fees $($for inspection and installation$)10,000$

Shipping and transport costs $6,000$

Site preparation costs:

Direct labour costs $5,000$

Concrete reinforcement $4,000$

Maintenance and service contract for $1$ year $3,000$

Dodo Sdn Bhd received a trade discount of $10\%$ on list price and $5\%$ cash

discount on early settlement. Dodo Sdn Bhd obtained a loan of RM$380,000$ to

finance the purchase. Interest expense on the loan for the year was RM$38,000.$

The equipment has a useful life of $5$ years. Dodo Sdn Bhd estimates that

dismantling cost to be RM$3,500$ and legal obligation to restore the site is

RM$6,500.$ Both these values are stated in present values.

Required:

Calculate the initial cost of the plant. Your answer should explain the reasons

why some of the costs are not included in the calculation. $(15$ marks$)$