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The production of a special product, Alpha, is being considered to use up the spare capacity which is available this year. This product is unlikely to be produced in future years. It requires 200 kg of material A15 which has been in stock since it was purchased last year for an order which was subsequently cancelled. No other use for the material is envisaged at the present time. It had cost £35 per kg, whereas new supplies would now cost £30 per kilo. However, if this old stock was resold today it would realise only £20 per kg.
Question 1: The relevant cost of material A15 in assessing the special product is:
Option A. £6,000
Option B. Zero
Option C. £7,000
Option D. £4,000
Estimate that it will take five years to complete
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