Nowak 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 1,600 units of component FHB.Each unit of FHB requires 8 units of material N95 and 1 unit of material K78.Data concerning these two materials follow: Material N95 is in use in many of the company's products and is routinely replenished.Material K78 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 FHB?

Question

Nowak 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 1,600 units of component FHB.Each unit of FHB requires 8 units of material N95 and 1 unit of material K78.Data concerning these two materials follow:  Material N95 is in use in many of the company's products and is routinely replenished.Material K78 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 FHB?

Quizplus · Accepted Answer

Relevant cost of 1,600 units of FHB:
 11eaaee8_667a_2d56_933a_3f33cbce205e_TB5186_00

Nowak Corporation Is a Specialty Component Manufacturer with Idle Capacity