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help me solve the following,
a company has 2000kg of material for a contract it has been asked to quote for. they currently have 1500kg in inventory and the material has no other use. the inventory originally cost $8 per kg , the current cost is $10 per kg and material could be sold for $9 per kg.
what is the relevant cost for the material required for the contract?
You really should watch the free lecture on this because this is a very standard question!!
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For the 1500 kg in inventory, it is the opportunity cost of the lost sale proceeds which is $9 per kg.
The other 500 kg will have to be purchased at the current cost of $10 per kg.
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