150 kg of Material Z, which have been purchased for 5/kg six months ago, have been in inventory since then and will not be used any more in the regular production. The current market price of Material Z is 6/kg.

The sales manager want to win an order for a new customer, for which 200 kg of Material Z would be required. For the 150 kg Material Z in inventory, there are two alternative uses:

1) they could be sold for 6/kg, but at the same time this would cause additional selling costs of 1/kg (Hint: calculate the NRV!)

2) the 150 kg could be used as a substitute for 100 kg of Material A which currently costs 8 per kg, with the 150 kg of Material Z having to be reworked at a cost of 2 per kg of Material Z. So, 150 kg "Z" would yield only 100 kg of "A" after the remodelling process.

What is the short-term relevant cost for the 200 kg of Material Z to be included in the pricing decision for the special contract? (Don't forget to include the acquisition cost of the quantity which is NOT in inventory.)

a) The potential benefit under option 1 (sale) would be ?

b) The potential benefit under option 2 (using it as a substitute for Material A) would be ?

c) Therefore, the short-term relevant cost of the 150kg "Z" in inventory is ?

d) the TOTAL SHORT-TERM RELEVANT COST (200kg!) of Material Z - as a guideline for the (minimum) price to set for this special contract - is ?