v

Material X is a dangerous material. 90 kg are currently held in inventory and there are no alternative uses. It was purchased for 16/kg one year ago. The current purchase price for this material is 18/kg. Once purchased, it cannot be resold, because the seller needs a specific licence to sell this material. The cost to dispose of the dangerous material is 5/kg. There is a special opportunity to use the material in inventory for a special contract, for which the company will need 200 kg in total. The contract should be completed within the next month. Additionally, the contract would require 45 working hours. The workers employed by the company currently have spare capacity for these 45 hours within the next 30 days and could carry out the work for this special contract within their regular working time. They are paid 14/hour. The Fixed costs (or: fixed overheads) of the company of 6,500 per month would increase to 6,800 in the month in which the contract would be performed. Calculate the total relevant cost of the special contract, so that the company gets an idea about the absolute minimum price it can set for the special customer. The short-term relevant cost of Material X is The short-term relevant cost of labour is The short-term relevant amount for overheads is Therefore, the total short-term relevant cost - as a guideline for the (minimum) price to set for this special contract - is