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Park Corporation is preparing a bid for a special order that would require 740 liters of...

Park Corporation is preparing a bid for a special order that would require 740 liters of material SUN100. The company already has 580 liters of this raw material in stock that originally cost $6.50 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 $5.90 per liter. New stocks of the material can be readily purchased for $6.85 per liter. What is the relevant cost of the 740 liters of the raw material when deciding how much to bid on the special order? (CIMA adapted)

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Answer #1

Relevant cost

= liters needed * price per liter in the market

= 740 * 6.85

= 5069
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