- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
could you please explain how to find the relevant cost of material d.
O’Reilly Co has been approached by a customer who would like a special job to be done for them, and who is willing to pay $22,000 for it. The job would require the followingmaterial total units required units in inventory scrap value current
purchase price
D 200 200 6 9the units of material D could be used in another job as substitute for 300 units of material E, which currently costs $5 per unit (of which the company has no units in inventory at the moment).
what is the relevant cost of material D?
the answer for the following question is 1500If they do not use the 200 units of D for the special job, they will instead use them to substitute for 300 units of E which will save them 300 x $5 = $1,500 as a result.
If instead they use D for the special job, then they will not make the saving on E (and will have to pay $1,500 to buy E). So the relevant cost of using D is $1,500.
- You must be logged in to reply to this topic.