Question
6. Clipper Corporation is a specialty component manufacturer with idle capacity. Management would like to use its unused capacity to generate additional profits. A potential
6. Clipper Corporation is a specialty component manufacturer with idle capacity. Management would like to use its unused capacity to generate additional profits. A potential customer has offered to buy 7,600 units of component VFG. Each unit of VFG requires 8.00 units of material C79 and 6.00 units of material X70. Data concerning these two materials follow: |
Material | Units in Stock | Original Cost Per Unit | Current Market Price Per Unit | Disposal Value Per Unit | |||
C79 | 33,820 | $5.20 | $4.75 | $4.50 | |||
X70 | 32,460 | $10.70 | $11.00 | $9.75 |
Material C79 is in use in many of the company's products and is routinely replenished. Material X70 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up. |
What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product VFG? |
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