Schemm Inc

question 144

Multiple Choice

Schemm Inc.regularly uses material F04E and currently has in stock 460 liters of the material for which it paid $2,622 several weeks ago.If this were to be sold as is on the open market as surplus material,it would fetch $5.25 per liter.New stocks of the material can be purchased on the open market for $5.85 per liter,but it must be purchased in lots of 1,000 liters.You have been asked to determine the relevant cost of 800 liters of the material to be used in a job for a customer.The relevant cost of the 800 liters of material F04E is:

• A)$5,850
• B)$4,200
• C)$4,404
• D)$4,680

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Definitions:

Accounts Payable

Amounts owed by a business to its suppliers shown as a liability on a company’s balance sheet and typically due within a short period of time, often 30 to 90 days.

Equipment

Tangible assets used in the operations of a business, not intended for sale, and depreciated over time.

Drawing Account

An account that tracks the amount withdrawn by the owners from the business for personal use.

Credit Balance

The amount appearing on the credit side of a ledger, indicating the total credits exceed the total debits in an account.