Question

Schickel Inc. regularly uses material B39U and currently has in stock 460 liters of the material for which it paid $3,128 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.95 per liter. New stocks of the material can be purchased on the open market for $6.45 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 760 liters of the material to be used in a job for a customer. The relevant cost of the 760 liters of material B39U is: A. $4,522 B. $4,672 C. $6,450 D. $4,902

Answer 1

Answer:

D. $4,902

Explanation:

Schickel Inc.

RELEVANT COST can be defined as the cost that are often said to be incurred only when making specific and important business decisions because this relevant cost is used to determine whether to sell or keep a business which is why relevant cost concept is useful for eliminating some information from a particular decision-making process.

Relevant cost=

New stocks of the material purchased for $6.45 per liter.

Relevant cost of 760 liters of the material to be used.

Hence;

= $6.45 per liter ×760 liters = $4,902

Therefore the relevant cost of the 760 liters of material B39U is $4,902