Scherer Corporation is preparing a bid for a special order that would require 82

Question

Scherer Corporation is preparing a bid for a special order that would require 820 liters of material U48N. The company already has 560 liters of this raw material in stock that originally cost $7.30 per liter. Material U48N 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 $6.80 per liter. New stocks of the material can be readily purchased for $7.65 per liter. What is the relevant cost of the 820 liters of the raw material when deciding how much to bid on the special order?

Select one:

a. $5,592

b. $4,788

c. $6,456

d. $6,273

Explanation / Answer

Ans d. $ 6273

820 Ltrs @ $ 7.65 = $ 6273

As the material is already in use therefore considering the opportunity cost material should be purchased from the market.

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