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Rangitikei Ltd has received an order for a product it does not normally manufacture. The company does have spare capacity and is considering accepting the order. In analysing the decision, the following data has been compiled:
Required: Show all your workings.
Question i. If the order is accepted, what will the relevant cost of chemical Y be?
Question ii. Discuss each of the following items in terms of their relevance to the decision:
a) Current stock of chemical Y of 8 000 kg at $16.20 per kg.
b) 1 000 kg of chemical Y used for the special order.
c) Cost per kg ($17.40) of chemical Y if order is placed earlier.
d) Cost per kg ($16.60) of chemical Y if order is placed at normal re-order time.
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