Intercontinental’s special order requires 1,200 kilograms of genatope, a solid chemical regularly used in the company’s products. The current stock of genatope is 9,500 kilograms at a book value of 8.80 p per kilogram. If the special order is accepted, the firm will be forced to restock genatope earlier than expected, at a predicted cost of 9.40 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 9.00 p when normal restocking takes place. Any order of genatope must be in the amount of 5,500 kilograms.
Required:
a. What is the relative cost of genatope?
Answers: 1
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