Scherer Corporation Is Preparing a Bid for a Special Order

question 121

Multiple Choice

Scherer Corporation is preparing a bid for a special order that would require 720 liters of material U48N.The company already has 560 liters of this raw material in stock that originally cost $6.30 per liter.Material U48N is used in the company's main product and is replenished on a periodic basis.The resale value of the existing stock of the material is $5.80 per liter.New stocks of the material can be readily purchased for $6.65 per liter.What is the relevant cost of the 720 liters of the raw material when deciding how much to bid on the special order?

• A)$4,592
• B)$4,788
• C)$4,456
• D)$4,176

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Definitions:

Interest Rate

The percentage charged on the total amount you borrow or earn on an investment, typically expressed annually.

Marketable Securities

Financial instruments that can be quickly converted into cash at a known price, such as stocks or bonds.

Optimal Initial Balance

The ideal starting amount of funds that maximizes the effectiveness or efficiency of a financial account or investment strategy.

BAT Model

Stands for the Best Alternative to a Negotiated Agreement; a benchmark used in negotiations to determine each party's alternative options if the current negotiations fail.