Otool Inc. is considering using stocks of an old raw material in a special proje

Question

Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 240 kilograms of the raw material that are in stock and that originally cost the company $2,112 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $9.25 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $8.35 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 $71.00 for all 240 kilograms. What is the relevant cost of the 240 kilograms of the raw material when deciding whether to proceed with the special project? A) $1,933 B) $2,004 C) $2,220 D) $2,112

Explanation / Answer

Hi, Please find the answer as follows: Opportunity cost of sales forgone: (8.35

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