Question

The following are Silver Corporation's unit costs of making and selling an item at a volume of 9,400 units per month (which represents the company's capacity): Manufacturing: Direct materials $ 3.00 Direct labor $ 4.00 Variable overhead $ 2.50 Fixed overhead $ 0.85 Selling and administrative: Variable $ 4.00 Fixed $ 1.25 Present sales amount to 6,400 units per month. An order has been received from a customer in a foreign market for 3,000 units. The order would not affect regular sales. Total fixed costs, both manufacturing and selling and administrative, would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume that direct labor is a variable cost. Assume the company has 100 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap. These units will be sold through regulare sales channels and the sale of these defective units will have no effect on the company's other sales. Which of the following costs is relevant in this decision?(A) $9.50 variable manufacturing cost(B) $10.35 unit product cost(C) $4.00 variable selling and administrative cost(D) $15.60 full cost

Answer 1

C) $4.00 variable selling and administrative cost

Step-by-step explanation:

Based of the information given the costs that is RELEVANT in this decision is the amount of $4.00 which is variable selling and administrative cost reason been that RELEVANT COSTS are cost that are tend to be incurred only in a situation when making a particular organization or business decison reason been that the costs are variable costs which will later change in the future due to the organization decison