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Gate Co is a construction company that installs heating, ventilation, and air conditioning systems (HVAC). A large real estate developer, Homes Co, has requested a quote for a single HVAC installation. A proposal needs to be prepared on a relevant cost basis so Gate Co can offer a price that is as low as possible. Homes Co has stated that the job must be completed within 3 weeks.
The following information has been gathered:
Materials
120 meters of ventilation pipe are required at the start of the project. This material is used in all of Gate Co’s projects. There are 75 meters of ventilation pipe which cost $8.60 per meter currently in stock. While a large order of this material is expected in 2 weeks, an express delivery from an alternate supplier can be made. This supplier charges $9.20 per meter, which is $0.60 higher than their normal price, and $50 for the delivery.
it says relevant cost is Ventilation pipe75 * 8.60 + 45 * 9.20 + 50=1,109
why can’t we do 120*8.60 instead of 75 * 8.60 + 45 * 9.20 + 50 , it’s said in the question a large order of this material is expected in 2 weeks and the deadline is 3 weeks and its also said to be used in all of gate comp project
The question states that there are 75 meters of ventilation pipe currently in stock, which cost $8.60 per meter. Additionally, an express delivery from an alternate supplier can be made, which charges $9.20 per meter and $50 for the delivery.
To calculate the relevant cost, you need to consider the cost of the ventilation pipe currently in stock which is 75 meters * $8.60, the cost of the additional ventilation pipe needed is 45 meters * $9.20 per meter and the cost of the delivery $50.
Therefore, the relevant cost is 75 meters * $8.60 + 45 meters * $9.20 + $50 = $1,109.
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