Question

Yehle Inc. regularly uses material Y51B and currently has in stock 471 liters of the material for which it paid $2,633 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.37 per liter. New stocks of the material can be purchased on the open market for $5.97 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 500 liters of the material to be used in a job for a customer. The relevant cost of the 500 liters of material Y51B is

Answer 1

$5.97 per liter

Step-by-step explanation:

The relevant cost would be the replacement cost.

Purchase the liters would require $5.97 per liter.

The purchase cost is a sunk cost.

If the company assing that cost it would not purchase the same ammount of liter again.

Same goes for the open market cost, it will not purchase the same amount of liter using this cost.