Voice Ltd produces sound equipment for conference and teaching venues. Recently, it has received a request...

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Voice Ltd produces sound equipment for conference and teaching venues. Recently, it has received a request to install a new sound system in the Peacock Theatre. The job will have the following material requirements: Component A: Component B: Component C: 30 units 10 units 20 units Additional information: 1. Component A is normally held in inventories as it is widely used throughout the business's product range. There are 15 components currently held. These had cost £1,800 each. The sole supplier of this component has announced an immediate price rise of 5% for further purchases. 2. Component B is no longer used for any other of the business's products. At present there are six components in inventories costing £2,000 each. It is possible to buy additional components at a cost of £2,200 each; however, the supplier insists on a minimum order quantity of six components. Any unused components will be disposed of at a total cost to the business of £250, irrespective of the quantity to be disposed of. 3. Component C is used by the business throughout its product range. At present there is none in inventories. However, an order for 20 components for use in another contract is about to be placed. The supplier normally charges £1,600 per component but for orders above 30 components a discount of 10% is available on the total order price REQUIRED: (b) What is the relevant cost of the material for the installation of the new sound system in the Peacock Theatre? Clearly explain the treatment of all of the information given in the question. www (b) Explain the concept of opportunity cost in a managerial context. Voice Ltd produces sound equipment for conference and teaching venues. Recently, it has received a request to install a new sound system in the Peacock Theatre. The job will have the following material requirements: Component A: Component B: Component C: 30 units 10 units 20 units Additional information: 1. Component A is normally held in inventories as it is widely used throughout the business's product range. There are 15 components currently held. These had cost £1,800 each. The sole supplier of this component has announced an immediate price rise of 5% for further purchases. 2. Component B is no longer used for any other of the business's products. At present there are six components in inventories costing £2,000 each. It is possible to buy additional components at a cost of £2,200 each; however, the supplier insists on a minimum order quantity of six components. Any unused components will be disposed of at a total cost to the business of £250, irrespective of the quantity to be disposed of. 3. Component C is used by the business throughout its product range. At present there is none in inventories. However, an order for 20 components for use in another contract is about to be placed. The supplier normally charges £1,600 per component but for orders above 30 components a discount of 10% is available on the total order price REQUIRED: (b) What is the relevant cost of the material for the installation of the new sound system in the Peacock Theatre? Clearly explain the treatment of all of the information given in the question. www (b) Explain the concept of opportunity cost in a managerial context.

Answer rating: 100% (QA)

Statement Showing the Relevent Cost Description Amount Component A 15 Units X 1890 28350 Component B 6 Units X 2200 13200 Diposal of Component B 250 C... View the full answer