Roddey Corporation is a specialty component manufacturer with idle capacity.Management would like to use its extra capacity to generate additional profits.A potential customer has offered to buy 2, 900 units of component GEE.Each unit of GEE requires 3 units of material R39 and 8 units of material I59.Data concerning these two materials follow: Material R39 is in use in many of the company's products and is routinely replenished.Material I59 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up. What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product GEE?
A)$224, 605
B)$196, 765
C)$228, 204
D)$193, 285

Question

Roddey Corporation is a specialty component manufacturer with idle capacity.Management would like to use its extra capacity to generate additional profits.A potential customer has offered to buy 2, 900 units of component GEE.Each unit of GEE requires 3 units of material R39 and 8 units of material I59.Data concerning these two materials follow:  Material R39 is in use in many of the company's products and is routinely replenished.Material I59 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up. What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product GEE?
A)$224, 605 
B)$196, 765 
C)$228, 204 
D)$193, 285

Quizplus · Accepted Answer

Materials requirements for R39: 2, 900 units of GEE × 3 units of R39 per unit of GEE = 8, 700 units of R39
Materials requirements for I59: 2, 900 units of GEE × 8 units of I59 per unit of GEE = 23, 200 units of I59
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Roddey Corporation Is a Specialty Component Manufacturer with Idle Capacity