Question

Two months ago, Air-tite Corporation purchased 5,500 pounds of Hydrol, paying $18,700. The demand for this product has been very strong since the acquisition, with the market price jumping to $4.05 per pound. (Air tite can buy or sell Hydrol at this price.) The company recently received a special-order inquiry, one that would require the use of 5,100 pounds of Hydrol.
Which of the following is (are) relevant in deciding whether to accept the special order?

A. The 400-pound remaining inventory of Hydrol.
B. The $4.05 market price.
C. The $3.40 purchase price.
D. 5,500 pounds of Hydrol
E. Two or more of the other factors are relevant.

Answer 1

Answer:

A, B.  

Explanation:

A is relevant as the 400-pound remaining can be sold at market price after the special order

B is relevant as the whole 5,500 can be sold at market price instead of the special order

C is irrelevant as the cost has already been uncured

D is irrelevant