Question

Park Corporation is preparing a bid for a special order that would require 780 liters of material SUN100. The company already has 600 liters of this raw material in stock that originally cost $6.90 per liter. Material SUN100 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 $6.10 per liter. New stocks of the material can be readily purchased for $7.25 per liter. What is the relevant cost of the 780 liters of the raw material when deciding how much to bid on the special order? (CIMA adapted)

Answer 1