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Schemm Inc. regularly uses material F04E and currently has in stock 463 liters of the material for which it paid $2,625 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.29 per liter. New stocks of the material can be purchased on the open market for $5.89 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 600 liters of the material to be used in a job for a customer. The relevant cost of the 600 liters of material F04E is:______.
a. $3,534.
b. $3,174.
c. $5,890.
d. $3,255.

Respuesta :

Answer:

c. $5,890

Explanation:

Data provided

Quantity of material purchased to be used in job = 1,000

Current market price = $5.89 per litre

The computation of relevant cost is shown below:-

Relevant cost of material F04E = Quantity of material purchased to be used in job × Current market price

= 1,000 × $5.89 per liter

= $5,890

Therefore for computing the relevant cost of material F04E we simply multiply the Quantity of material purchased to be used in job with Current market price.

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