Case :Relevant Costing A company has been making a machine to order for a customer, but the customer has

since gone into liquidation and there is no prospect any money will be obtained from the winding up of the company. Cost incurred to date in manufacturing a machine are Rs50000 and progress payments of Rs.15000 have been received from the customer prior to the liquidation. The sales department has found another company willing to buy the machine for Rs.40000 once it has been completed. To complete the work the following cost would be incurred. 1. Materials- these have been bought at a cost of Rs.6000.These materials are in regular use by the company and their current replacement cost is Rs.6500.Scrap value of these materials are Rs.4500. 2. Further labour cost would be Rs8000.Labour is in short supply and if the machine is not finished the work force would be switched to another job which would earn Rs.12000 in contribution (before deducting direct labour). Otherwise the company has to refuse the other job due to non-availability of labour. 3. Consultancy fees Rs.4000, if the work is not complete the consultancy contract would be cancelled at cost of Rs1500. 4. Other Variable overheads that will be incurred to complete the machine are Rs.2000 5. Common firm-wide fixed cost allocated to this project are Rs.8000 If the customers offer is not accepted, only other option is to scrap the in-complete machine for Rs.6000. Should the new customers offer be accepted?