Question

Marigold Corp. produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 55000 Direct labor 160000 Variable overhead 75000 Fixed overhead 175000 If Marigold buys the part from an outside supplier, $20000 of the fixed overhead is avoidable. What is the relevant cost per unit of part A12E

Answer 1

Answer:

$62.00

Explanation:

The relevant costs are those costs that will be affected by a decision. The part of fixed costs that is avoidable is relevant.

Calculation of Relevant Costs for A12E

Direct materials ($ 55000/ 5000 units)      $11.00

Direct labor ($160000/ 5000 units)           $32.00

Variable overhead ($75000/5000 units)   $15.00

Fixed Overhead ($20000/ 5000 units)       $4.00

Total Cost                                                    $62.00