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20 March, 21:26

Exercise 14-37 Special Order (LO 14-4, 14-5) [The following information applies to the questions displayed below.] Intercontinental's special order requires 1,300 kilograms of genotype, a solid chemical regularly used in the company's products. The current stock of genotype is 9,900 kilograms at a book value of 9.20 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 9.80 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 9.40 p when normal restocking takes place. Any order of genatope must be in the amount of 6,600 kilograms. Exercise 14-37 Part 1 Required: 1. What is the relevant cost of genatope?

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  1. 20 March, 21:36
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    the relevant cost will also include the differential cost for taking the order as it is related to the order being taken or not.

    Explanation:

    The product is regularly used therefore, it will be sold in the future.

    addtional inventory cost:

    6,600 x (9.80 - 9.40) = 2,640

    Cost of good sold

    1,300 x 9.20 = 11,960

    Total cost for the order 14,600
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