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H has in inventory 15,000kg of M, a raw material which is bought 3/kg five years ago, for a product line which was discontinued four years ago. M has no use in this existing state but could be sold as a scrap for 1/kg. One of the company’s current products (HN) requires 4kg of raw material, available for $5/kg. M can be modified at a cost of 0.75/kg so that it may be used as substitute for this material. However, after modification, 5 kg of M is required for every unit of HN to be produced.
H has now received an invitation to tender for a product which could use M in its present state.What is the relevant cost per kg of M to be included in the cost estimate fo the tender?
is there a final answer given? i am getting $1.75/kg
where did u find this question?
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