SOURCE: ADAPTED FROM CIMA PAPER 2 (MAY 2008), QUESTION 1.8 A company is considering a short-term pricing decision to utilise some spare capacity. The item to be manufactured and sold would use 1 500 kg of raw material Q.

Material Q is in regular use by the company. It currently has 1 000 kg in inventory, which was purchased last month at a cost of R4 per kg. The current replacement cost of material Q is R4,80 per kg and the current inventory could be sold for R4,30 per kg.

Calculate the relevant cost of material Q for the purposes of this decision.