Question

22) BS Company is considering eliminating the following product line: Product AXP Sales $ 80,000 Less variable costs: Raw materials 50,000 Direct labor 10,000 Contribution margin $ 20,000 Less fixed costs: Facility-level costs allocated to products 30,000 Profit (Loss) $ (10,000 ) What amount of cost is avoidable if BS outsources production of this product

Answer 1

Avoidable costs= $60,000

Step-by-step explanation:

Giving the following formula:

Raw materials 50,000

Direct labor 10,000

Facility-level costs allocated to products 30,000

We were not provided with information regarding the fixed allocated costs. If none of the fixed allocated costs are avoidable, only the variable cost will not be incurred if the product is eliminated.

Avoidable costs= $60,000