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2b) Solid Chemical Company (SCC) recently received an order for a product that it does not normally produce. Since the company has excess production capacity,
2b) Solid Chemical Company (SCC) recently received an order for a product that it does not normally produce. Since the company has excess production capacity, management are considering accepting the order. In analysing the decision, the assistant accountant is compiling the relevant costs of producing the order. Production of the special order would require 8,000 kgs of nitrate. SCC does not use the nitrate for its regular product, but the firm has 8,000 kgs of the chemical on hand from the days when its used nitrate regularly. The nitrate could be sold to a chemical wholesaler for $21,750. The book value of the nitrate is $3 per kg. SCC could buy the nitrate for $3.60 per kg. You are required to i) Determine the relevant cost of nitrate for the purpose of analysing the special order decision? ii) Discuss each item of numerical data detailed in the case in term of its relevance to the decision
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