Plasma Plc deals in plastic buckets and bottles. It usespolystyrene for manufacturing buckets, and polyethylene for manufacturing bottles. For every unit of bucket andbottle, it requires 0.5 kg of the required raw material each.

Plasma has received a bulk order for 1,000 buckets and 800bottles, and is evaluating this order. The data relating to theraw material requirements are as follows:

	Polystyrene	Polyethylene
Required quantity for the order Inventory in hand Original cost of inventory in hand (Tshs’000/kg) Current purchase price of the materials (Tshs’000/kg) Current resale price of the materials (Tshs’000/kg)	500 kg 150 kg 60 65 66	400 kg 80 kg 80 74 60

Polystyrene is regularly used by the company in the normalproduction of buckets. However, Plasma has decided to stopthe production of bottles, and so polyethylene is no longer in use by the company and it has no alternative use within the business.

Required:

Compute the total relevant cost of materials for the project.

Answer rating: 100% (QA)

To compute the total relevant cost of materials for the project we need to consider the following fa... View the full answer