Shortt Company has been approached by a customer who is offering a one-time-only special order to buy 4,360 units of a customer-designed part. Each one of these parts requires 4 units of raw material A10 and 4 units of raw material C70. Data concerning these two raw materials follow: Units in raw materials inventory, Cost per unit in raw materials inventory, Current market price per unit, Disposal value per unit:
A10: 1,980, $7.30, $8.30, $3.80
C70: 14,360, $7.80, $8.80, $4.30
The current market price per unit mentioned above reflects the prices currently charged by Shortt Company’s raw materials supplier. The disposal value per unit mentioned above reflects the price that a recycling company would pay Shortt to purchase any unused raw materials that it wishes to liquidate. Material A10 is used by many of the company’s products and is routinely replaced. Material C70 is no longer used by the company in any of its normal products. Required: What is the relevant cost of the raw materials that the company should include in its analysis when deciding whether to accept or reject the special order?
a. $7.30 per unit for A10 and $7.80 per unit for C70
b. $8.30 per unit for A10 and $8.80 per unit for C70
c. $3.80 per unit for A10 and $4.30 per unit for C70
d. $4.30 per unit for A10 and $3.80 per unit for C70