Question
Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 160 kilograms of the
Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 160 kilograms of the raw material that are in stock and that originally cost the company $1836 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7.6 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $6.90 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $82 for all 160 kilograms. What is the relevant cost of the 160 kilograms of the raw material when deciding whether to proceed with the special project?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started