Question

Help Save & ExtSub Tara Inc. is considering using stocks of an old raw material in a special project. The special project would require all 320 kilograms of the raw material that are in stock and that originally cost the company $2.240 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7.25 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $6,50 per kilogram if it were not used in the special project. The sale of the raw material would Involve delivery to the purchaser at a total cost of $115 for all 320 kilograms. What is the relevant cost of the 320 kilograms of the raw material when deciding whether to proceed with the special project? (CIMA adapted) Multiple Choice O o oo < Prev 22 50

Answer 1

Answer :- $1,965 Explanation: Amount (5) $2,080 opportunity cost of sales foregone if special project is undertaken (320x$6.5) Less: Delivery cost Relavent cost of 320 kilograms of Raw Material $(115) $1,965

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