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Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 240 kilograms of the raw material that are in stock and that originally cost the company $2,112 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $9.25 per kilogram. However, the company has no other use for this raw material and could sell it at the discounted price of $8.35 per kilogram if it were not used in the special project. In that case, Otool would pay $71 for the delivery of all 240 kilograms to the purchaser. What is the relevant cost of the 240 kilograms of the raw material when deciding whether to proceed with the special project

Respuesta :

Answer:

The relevant cost is $1933

Explanation:

Opportunity cost of sales foregone if special project is

undertaken ($8.35 × 240)                                              $2,004

Less: delivery cost                                                          $71

Relevant cost of 240 kilograms of raw material          $1,933

temmydbrain

Answer:

$1,933

Explanation:

Relevant cost is the administrative accounting expression that explains the various avoidable costs that are incurred only when precise business decisions are being made. The theory of relevant cost is used to eradicate needless data that could make the decision-making process and procedure a difficult one.

the Solution to the question: Opportunity cost of sales foregone if special project is

undertaken ($8.35 × 240)...............................................$2,004

Less: delivery cost............................................................. 71

Relevant cost of 240 kilograms of raw material................$1,933

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