Question
Shrewsbury Ltd is a manufacturer of aircraft parts. They have been asked to supply 500 identical components to one of their customers this year, and
Shrewsbury Ltd is a manufacturer of aircraft parts. They have been asked to supply 500 identical components to one of their customers this year, and are deciding whether to accept the order. Each component uses 5kg of steel, and there are 10,000 kg in stock. This was bought at a cost of 11 per kg. The current price of steel is 13 per kg. Future purchases of steel are likely to be at 15 per kg. The company uses steel continuously in its production departments. What is the relevant cost of the steel to be included in deciding whether or not the company should accept the order?
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