1 answer

Required information [The following information applies to the questions displayed below.] Intercontinental Chemical Company, located in...

Question:

Required information [The following information applies to the questions displayed below.] Intercontinental Chemical Company,

Required information [The following information applies to the questions displayed below.] Intercontinental Chemical Company, located in Buenos Aires, Argentina, recently received an order for a product it does not normally produce. Since the company has excess production capacity, management is considering accepting the order. In analyzing the decision, the assistant controller is compiling the relevant costs of producing the order. Production of the special order would require 8,900 kilograms of theolite Intercontinental does not use theolite for its regular product, but the firm has 8,900 kilograms of the chemical on hand from the days when it used theolite regularly. The theolite could be sold to a chemical wholesaler for 14,500 p. The book value of the theolite is 3.40 p per kilogram. Intercontinental could buy theolite for 3.80 pper kilogram. (p denotes the peso, Argentina's national monetary unit. Many countries use the peso as their unit of currency. On the day this exercise was written, Argentina's peso was worth .104 U.S dollar.) Required: 1-a. What is the relevant cost of theolite for the purpose of analyzing the special-order decision? 1-b. The relevant cost of theolite for the purpose of analyzing the special-order decision is an example of: Complete this question by entering your answers in the tabs below. Req 1A Req 1B What is the relevant cost of theolite for the purpose of analyzing the special-order decision? Relevant cost 14,800 p <Req 1A Req 1B

Answers

Solution 1A:

Relevant cost of theolite for the purpose of analyzing the special order = Current market value that could be realized on selling existing stock = 14500 p

Solution 1b:

The relevant cost of theolite for the purpose of analyzing special order is an example of opportunity cost.

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