Global’s special order also requires 1,300 kilograms of genatope, a solid chemic
ID: 2421961 • Letter: G
Question
Global’s special order also requires 1,300 kilograms of genatope, a solid chemical regularly used in the company’s products. The current stock of genatope is 9,400 kilograms at a book value of 8.80 p per kilogram. If the special order is accepted, the firm will be forced to restock genatope earlier than expected, at a predicted cost of 9.40 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 9.00 p when normal restocking takes place. Any order of genatope must be in the amount of 5,000 kilograms.
What is the relevant cost of genatope (in pesos (p))?
The answer is not 47000 pesos, 520 pesos,12220 pesos, nor 35,560 pesos
Global’s special order also requires 1,300 kilograms of genatope, a solid chemical regularly used in the company’s products. The current stock of genatope is 9,400 kilograms at a book value of 8.80 p per kilogram. If the special order is accepted, the firm will be forced to restock genatope earlier than expected, at a predicted cost of 9.40 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 9.00 p when normal restocking takes place. Any order of genatope must be in the amount of 5,000 kilograms.
What is the relevant cost of genatope (in pesos (p))?
The answer is not 47000 pesos, 520 pesos,12220 pesos, nor 35,560 pesos
Explanation / Answer
Answer: Calculation of the relevant cost of genatope (in pesos (p)):
Historical cost (8.80 p x 1300 Kg = 11,440 p)
Replacement cost of the genatope 11,700 p (1300 kg*9.00 p)
Cost of the rush order (5000 x .40 p) 2,000 p
Total cost 13,700 p
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