Roddey Corporation Is a Specialty Component Manufacturer with Idle Capacity

question 29

Multiple Choice

Roddey 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 2,900 units of component GEE.Each unit of GEE requires 3 units of material R39 and 8 units of material I59.Data concerning these two materials follow:
Material R39 is in use in many of the company's products and is routinely replenished.Material I59 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 GEE?

• A)$224,605
• B)$196,765
• C)$228,204
• D)$193,285

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Definitions:

Low-Opportunity Cost

Refers to a situation where choosing one option results in the smallest possible sacrifice in terms of the value of the next best alternative.

Appreciates

When the value of an asset or currency increases in value in comparison to another currency or benchmark.

Non-Free Trade

Trade practices where governments impose tariffs, quotas, or regulations to restrict the free flow of goods and services between countries.

Agricultural Subsidies

Government payments to farmers to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such goods.