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Chapter 6
Relevant cost of material
Material
In stock Out of stock
In regular use Will not be
and will be replaced
replaced Relevant cost =
Current purchase
price
Relevant cost = Relevant cost =
Current purchase opportunity cost,
price e.g. lost scrap value
or lost contribution
if use material here
instead of
elsewhere
Is there an
alternative use for
the materials?
No: Relevant Cost = Yes: Relevant cost
scrap/disposal value = higher of value in
other use or scrap
value
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