Question

Schickel Inc. regularly uses material B39U and currently has in stock 459 liters of the material for which it paid $2,621 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.24 per liter. New stocks of the material can be purchased on the open market for $5.84 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 600 liters of the material to be used in a job for a customer. The relevant cost of the 600 liters of material B39U is

Answer 1

The relevant cost of the 600 liters of material B39U is $3504 liters

Step-by-step explanation:

Since we have to compute the costing of 600 liters so we have take the open market per liter cost because it contain 1,000 liters. And the remaining cost is irrelevant for computation because it only contain 459 liters which is not useful for calculating part.

The computation of relevant cost of the 600 liters of material B39U is shown below:

= Number of liters × open market per liter

= 600 liters × $5.84

= $3,504 liters

Hence, the relevant cost of the 600 liters of material B39U is $3504 liters