Question

Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 55,000 Direct labor 160,000 Variable overhead 75,000 Fixed overhead 175,000 If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. What is the relevant cost per unit of part A12E?

Answer 1

The relevant cost per unit is USD 93/-.

Step-by-step explanation:

A) Total Cost= Direct Material+ Direct Labor+ Variable overhead+ Fixed Over Head

T.C= 55,000+160,000+75,000+175,000= 465,000/-

B) Unit Price= T.C/Units

U.P= 465,000/5000

U.P= USD 93/-

Answer 2

$85

Step-by-step explanation:

Ortiz Co.

Before

Direct Materials: $55,000

Direct Labour: $160,000

Variable Overhead: $75,000

Fixed Overhead: $175,000

Total cost = $465,000

Cost per unit = Total cost/units produced = $465,000/5,000=$93

After

Direct Material: $55,000

Direct Labour: $160,000

Variable Overhead: $75,000

Fixed Overhead: ($175,000-$40,000)=$135,000

Total cost = $425,000

Cost per unit = Total cost/units produced = $85