Shortt Company has been approached by a customer who is offering a one-time-only special order to buy 4,340 units of a customer- designed part. Each one of these parts requires 4 units of raw material A10 and 4 units of raw material C70. Data concerning these two raw materials follow: A10 C70 Units in Raw Materials Inventory 1,970 14,340 Cost Per Unit in Raw Materials Inventory $ 7.20 $7,70 Current Market Price Per Unit $8.20 $ 8.70 Disposal Value Per Unit $ 3.70 $ 4.20 The current market price per unit mentioned above reflects the prices currently charged by Shortt Company's raw materials supplier. The disposal value per unit mentioned above reflects the price that a recycling company would pay Shortt to purchase any unused raw materials that it wishes to liquidate. Material A10 is used by many of the company's products and is routinely replaced. Material C70 is no longer used by the company in any of its normal products. Required: 1. What is the relevant cost of the raw materials that the company should include in its analysis when deciding whether to accept or reject the special order? 2. Assume that A10 and C70 are both no longer used in any of the company's normal products. What is the relevant cost of the raw materials that the company should include in its analysis when deciding whether to accept or reject the special order?
Shortt Company has been approached by a customer who is offering a one-time-only special order to buy 4,340 units of a customer- designed part. Each one of these parts requires 4 units of raw material A10 and 4 units of raw material C70. Data concerning these two raw materials follow: A10 C70 Units in Raw Materials Inventory 1,970 14,340 Cost Per Unit in Raw Materials Inventory $ 7.20 $7,70 Current Market Price Per Unit $8.20 $ 8.70 Disposal Value Per Unit $ 3.70 $ 4.20 The current market price per unit mentioned above reflects the prices currently charged by Shortt Company's raw materials supplier. The disposal value per unit mentioned above reflects the price that a recycling company would pay Shortt to purchase any unused raw materials that it wishes to liquidate. Material A10 is used by many of the company's products and is routinely replaced. Material C70 is no longer used by the company in any of its normal products. Required: 1. What is the relevant cost of the raw materials that the company should include in its analysis when deciding whether to accept or reject the special order? 2. Assume that A10 and C70 are both no longer used in any of the company's normal products. What is the relevant cost of the raw materials that the company should include in its analysis when deciding whether to accept or reject the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Shortt Company has been approached by a customer who is offering a one-time-only special order to buy 4,340 units of a customer-
designed part. Each one of these parts requires 4 units of raw material A10 and 4 units of raw material C70. Data concerning these two
raw materials follow:
A10
C70
Units in Raw
Materials Inventory
1,970
14,340
Cost Per Unit in
Raw Materials
Inventory
$7.20
$ 7,70
Current Market
Price Per Unit
$8.20
$ 8.70
Disposal Value
Per Unit
$ 3.70
$ 4.20
The current market price per unit mentioned above reflects the prices currently charged by Shortt Company's raw materials supplier.
The disposal value per unit mentioned above reflects the price that a recycling company would pay Shortt to purchase any unused
raw materials that it wishes to liquidate. Material A10 is used by many of the company's products and is routinely replaced. Material
C70 is no longer used by the company in any of its normal products.
Required:
1. What is the relevant cost of the raw materials that the company should include in its analysis when deciding whether to accept or
reject the special order?
2. Assume that A10 and C70 are both no longer used in any of the company's normal products. What is the relevant cost of the raw
materials that the company should include in its analysis when deciding whether to accept or reject the special order?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education