Milligan Corporation: Relevant Cost
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Milligan Corporation is preparing a bid for a special order that would require 780 liters of material TF54. The company already has 640 liters of this raw material in stock that original cost $8.30 per liter. Material TF54 is used in the company's main product and is replenished on a periodic basis. The resale value of the existing stock of the material is $7.60 per liter. New stocks of the material can be readily purchase for $8.35 per liter.
What is the relevant cost of the 780 liters of the raw material when deciding how much to bid on the special order?
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Solution Summary
This solution calculates the relevant cost of a raw material to determine whether a company should bid on a special order.
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