Question

Park Corporation is preparing a bid for a special order that would require 720 liters of material SUN100. The company already has 560 liters of this raw material in stock that originally cost $6.30 per liter. Material SUN100 is used in the company's main product and is replenished on a periodic basis. The resale value of the existing stock of the material is $5.80 per liter. New stocks of the material can be readily purchased for $6.65 per liter. What is the relevant cost of the 720 liters of the raw material when deciding how much to bid on the special order?

Answer 1

$4,788

Step-by-step explanation:

Data provided

Raw material in liters = 720

Purchased readily of new stock material = $6.65

The computation of relevant cost of the raw material is shown below:-

Relevant cost of the raw material = Raw material in liters × Purchased readily of new stock material

= 720 liters x $6.65

= $4,788

Therefore for computing the Relevant cost of the raw material we simply multiply the raw material in liters with purchased readily of new stock material.