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Dear Sir,
For Example: ABC Ltd is a plastic manufacturer who produce plastic cups and plastic jugs, since the market price of a row material (called resin) was lower therefore the finance director decided to buy resin in large volume (3 months material stock) in cash.
ABC Ltd just suddenly receive a new special order for Plastic Glass.
1) My question here is, does the cost of resin is relevant ?
2) will we really just ignore the material cost, just because it is already being paid ?It depends on whether the new product uses resin (what you have typed does not make that clear)!
Assuming it does use resin, then the relevant cost will be the cost of buying new resin – because it will need replacing in order to continue to produce the current products.
I suggest that you watch the free lectures on relevant costing.
In future, if you want me to answer, then you must ask in the Ask the Tutor Forum – this forum is for students to help each other.
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