Lampshire Inc.is considering using stocks of an old raw material in a special project.The special project would require all 160 kilograms of the raw material that are in stock and that originally cost the company $1,136 in total.If the company were to buy new supplies of this raw material on the open market,it would cost $7.25 per kilogram.However,the company has no other use for this raw material and would sell it at the discounted price of $6.50 per kilogram if it were not used in the special project.The sale of the raw material would involve delivery to the purchaser at a total cost of $75 for all 160 kilograms.What is the relevant cost of the 160 kilograms of the raw material when deciding whether to proceed with the special project?
A)$1,040
B)$965
C)$1,136
D)$1,160

Question

Quizplus · Accepted Answer

The company's relevant cost in this case is how much it could earn by selling the 160 kilograms at the discounted price of $6.50 per kilogram,less delivery costs of $75 for all 160 kilograms.
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