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Question - A company requires 600 kilograms of material Z for a new job for a new customer. This material is not used regularly by the company and it currently has 800 kilograms of it in inventory.
Material Z was purchased two years ago at a price of £7 per kg for another job and the amount in inventory was as a result of over-buying. The current market price of material 2 is £9 per kg but the company can only receive £6 per kg if it were to sell it.
However, the company has just found out that each kg of material 2 can be used as a substitute for half a kilogram of material X. Material X is used regularly by the company and the current market price is £15 per kilogram.
Required - What is the relevant cost of material Z to the company for this new job?
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