Liffick 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 6,200 units of component VFG.Each unit of VFG requires 8 units of material C79 and 6 units of material X70.Data concerning these two materials follow:

Material C79 is in use in many of the company's products and is routinely replenished.Material X70 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 VFG?
A)$528,551
B)$523,280
C)$476,350
D)$484,455

Question

Liffick 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 6,200 units of component VFG.Each unit of VFG requires 8 units of material C79 and 6 units of material X70.Data concerning these two materials follow:

Material C79 is in use in many of the company's products and is routinely replenished.Material X70 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 VFG?
A)$528,551 
B)$523,280 
C)$476,350 
D)$484,455

Quizplus · Accepted Answer

Materials requirements for C79: 6,200 units of VFG F1F1F1S1F1F1F10 8 units of C79 per unit of VFG = 49,600 units of C79
Materials requirements for X70: 6,200 units of VFG F1F1F1S1F1F1F10 6 units of X70 per unit of VFG = 37,200 units of X70
 11eaa48f_7b14_7c00_9e4a_8f3fde32c5b6_TB2485_00 * 37,200 units - 31,060 units = 6,140 units

Liffick Corporation Is a Specialty Component Manufacturer with Idle Capacity