Shortt Company has been approached by a customer who is offering a one-time-only special order to buy 4,180 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 1,890 14,180 Cost Per Unit in Raw Materials Inventory $ 6.40 $ 6.90 Current Market Price Per Unit $ 7.40 $ 7.90 Disposal Value Per Unit $ 2.90 $ 3.40 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 4,180 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 1,890 14,180 Cost Per Unit in Raw Materials Inventory $ 6.40 $ 6.90 Current Market Price Per Unit $ 7.40 $ 7.90 Disposal Value Per Unit $ 2.90 $ 3.40 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
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vishu
subject-Accounting
Transcribed Image Text:Shortt Company has been approached by a customer who is offering a one-time-only special order to buy 4,180 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
1,890
14, 180
Cost Per Unit in
Raw Materials
Inventory
$ 6.40
$ 6.90
Current Market
Price Per Unit
Required 1
$ 7.40
$ 7.90
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.
Disposal Value
Per Unit
$ 2.90
$ 3.40
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?
Required 2
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?
Complete this question by entering your answers in the tabs below.
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?
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