make or buy

Material A: Appler needs 500 kg of material for the compound but has 200 kg in stock
present. The stock items were bought 3 months ago for $5/kg but have suffered 10%
shrinkage since that date. Material A is not regularly used in the business and would have
to be disposed of at a cost to Appler of $400 in total. The current purchase price of
material A is $6.25/kg.

Material B: Appler needs 800 kg of material B and has this in stock as it is regularly needed.
The stock was bought 2 months ago for $4/kg although it can be bought now at $3.75/kg
due to its seasonal nature.

Processing energy costs would be $200 and the supervisor says he would allocate $150 of his weekly salary to the job in the company’s job costing system.

Based upon the scenario information, what is the total cost of material A and B to be built
in to the minimum price calculation?

1. The energy cost has not been included in the relevant cost. Could you explain why?