In order to utilize some spare capacity, E Limited is preparing a quotation for a special order which requires 800 kgs of material R.

E Limited has 350 kgs of material R in stock

(original cost £1.80 per kg). Material R is used in the company’s main product—F. Each unit Oran uses 4 kgs of material R and, based on an input cost of £1.80 per kg of R, each unit of F earns a contribution of £4.00.

The resale value of material R is £2.60 per kg.

The present replacement price of material R is

£3.00 per kg. Material R is readily available in the market.

The relevant cost of the 800 kgs of material R to be included in the quotation is A £1980. B £2080. C £2400.

D £2780. E £2880.

CIMA Stage 2—Operations Cost Accounting