Question
XYZ Company is considering venturing on a special order which will require 500 kgs of a special material, VCO. The company has 500 kg of
XYZ Company is considering venturing on a special order which will require 500 kgs of a special material, VCO. The company has 500 kg of VCO in inventory but cannot obtain additional supplies from the market. If this order is not accepted, then the company could accept special order no. 2 which would also require 500 kgs of VCO.
The revenues and costs associated special order no. 2 are as follows:
S.O. No. 2 |
|
Revenues | 55,000 |
Less: Costs-Original Purchase Price of VCO | 20,000 |
Other direct costs | 28,000 |
Profit | 10,000 |
The 500 kg of VCO could also be sold as it is for $16,000. What is the relevant cost of using 500 kg of VCO in the first special order?
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