Otool Incorporated Is Considering Using Stocks of an Old Raw

question 133

Multiple Choice

Otool Incorporated is considering using stocks of an old raw material in a special project. The special project would require all 190 kilograms of the raw material that are in stock and that originally cost the company $2,456 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $6.10 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $63 for all 190 kilograms. What is the relevant cost of the 190 kilograms of the raw material when deciding whether to proceed with the special project?

• A) $1,159
• B) $1,096
• C) $1,273
• D) $1,292

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Definitions:

Short-sighted

lacking foresight or perspective; making decisions based on immediate rather than long-term outcomes.

Synergy

The interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects.

Organizational

Pertaining to the structure and functioning of an organization, including its systems, processes, and dynamics.

Management

The process of planning, organizing, leading, and controlling resources to achieve organizational goals efficiently and effectively.