Question

The special order also would require 1,500 kilograms of tatooine, a material not normally required in any of Alderon’s regular products. The company does happen to have 2,000 kilograms of tatooine on hand, since it formerly manufactured a ceramic product that used the material. Alderon recently received an offer of $14,000 from Solo Industries for its entire supply of tatooine. However, Solo Industries is not interested in buying any quantity less than Alderon’s entire 2,000-kilogram stock. Alderon’s management is unenthusiastic about Solo’s offer, since Alderon paid $20,000 for the tatooine. Moreover, if the tatooine were purchased at today’s market price, it would cost $11.00 per kilogram. Due to the volatility of the tatooine, Alderon will need to get rid of its entire supply one way or another. If the material is not used in production or sold, Alderon will have to pay $1,000 for each 500 kilograms that is transported away and disposed of in a hazardous waste disposal site.What is the real cost of tatooine to be used in the special order?

Answer 1

Answer:

$15000

Explanation:

Given that:

The special order also would require 1,500 kilograms of tatooine

mass of tatooine usually at  hand =  2,000 kilograms

Alderon recently received an offer of $14,000 from Solo Industries for its entire supply of tatooine.

i.e Opportunity Cost of accepting the offer from solo industries= $14,000

Disposal cost = $1000

From these information, we can determine the real cost of tatooine to be used in the special order = opportunity cost of accepting the offer from solo industries in addition with the cost to transport away and dispose off  the extra 500 kilograms of tatooine.

∴

the real cost of tatooine to be used in the special order = $14,000 +  $1000

=  $15000