Tara Inc Is Considering Using Stocks of an Old Raw Material

question 146

Multiple Choice

Tara Inc. is considering using stocks of an old raw material in a special project. The special project would require all 160 kilograms of the raw material that are in stock and that originally cost the company $1,136 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7.25 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $6.50 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 $75.00 for all 160 kilograms. What is the relevant cost of the 160 kilograms of the raw material when deciding whether to proceed with the special project? (CIMA adapted)

• A) $1,040
• B) $965
• C) $1,136
• D) $1,160

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Definitions:

Interaction

The exchange or influence between two or more individuals, groups, or systems within a social context.

Talcott Parsons

An American sociologist known for developing a general theoretical framework for the social sciences and for his theories concerning social action, the system, and functionalism.

Robert Merton

An American sociologist known for his theories of social structure, anomie, and for developing the concept of self-fulfilling prophecy.

Middle-range Theories

Theories that operate between the minor but necessary working hypotheses that evolve in abundance during day-to-day research and the all-inclusive systematic efforts to develop a unified theory that will explain all the observed phenomena.