Cost Accounting question

[ebarker]

The purpose of the cost accounting rules are to keep the playing field level.

If someone for some crazy purpose decided to sell a $12,000 gizmo on ebay for $50 and had only one to sell, and you bought it, you would have to use a basis of $12,000 for the part, not $50, in order to comply with the rules.

That is because every team can not go out and by one off the shelf. It isn't fair if you somehow lucked out and got the magic part and no one else could buy it.

And I'm ignoring the fact here that a $12K part isn't legal because it exceeds financial limits. I'm just making the extreme example to demonstrate 'cost basis'.

Now if you went out and bought $50 worth of sand and potash and stuff and melted it down into a pot and made two pieces of super optical glass and rubbed them together until you had yourself a mirror that was worthy of the Hubble telescope and would really be worth $12,000,000, then it would be legal to have a cost basis of $50. Your labor is free, it is a fab part.

To be compliant with the rules of the contest and fair and gracious, you can certainly buy your titanium off of ebay for nickels to save money. But in the cost accounting you need to treat it as though you bought it from a retail supplier. The same thing goes if someone gave you a pile of aluminum, etc.