Schemminc regularly uses material F04E and currently has in stock 456 liters of

Question

Schemminc regularly uses material F04E and currently has in stock 456 liters of the material for which it paid $2,618 several weeks ago. If this were to be sold as is on the open market as surplus material. It would fetch $5.20 per liter. New stocks of the material can be purchased on the open market for $5.80 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 750 liters of the material to be used in a job for a customer. The relevant cost of the 750 liters of material F04E is: $3,900 $4,078 $4,350 $5,800

Explanation / Answer

Answer: $4350

The relevant cost is the current market value: 750 liters × current market $5.80 per liter = $4,350

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