Question

Vaughn Manufacturing 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 Vaughn buys the part from an outside supplier, $65000 of the fixed overhead is avoidable. What is the relevant cost per unit of part A12E?

Answer 1

"$71" is the correct answer.

Step-by-step explanation:

Given:

Number of units,

= 5,000

Direct material,

= 55,000

Direct labor,

= 160,000

Variable overhead,

= 75,000

Fixed overhead,

= 65,000

Now,

The total relevant costs will be:

=
`Direct \ materials+Direct \ labor+Variable \ overhead+Fixed \ overhead`

=
`55,000+160,000+75,000+65,000`

=
`355,000` ($)

hence,

The relevant cost per unit will be:

=
`(Total \ relevant \ costs)/(Number \ of \ units)`

=
`(355,000)/(5,000)`

=
`71` ($)