Scherer Corporation is preparing a bid for a special order that would require 80
ID: 2496984 • Letter: S
Question
Scherer Corporation is preparing a bid for a special order that would require 800 liters of material U48N. The company already has 640 liters of this raw material in stock that originally cost $7.10 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 $6.60 per liter. New stocks of the material can be readily purchased for $7.45 per liter. What is the relevant cost of the 800 liters of the raw material when deciding how much to bid on the special order?
Scherer Corporation is preparing a bid for a special order that would require 800 liters of material U48N. The company already has 640 liters of this raw material in stock that originally cost $7.10 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 $6.60 per liter. New stocks of the material can be readily purchased for $7.45 per liter. What is the relevant cost of the 800 liters of the raw material when deciding how much to bid on the special order?
Explanation / Answer
Relevant cost is the current market price
= 800 * $7.45 = $5,960
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