Question

Bramble Corp. produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 50000 Direct labor 155000 Variable overhead 70000 Fixed overhead 175000 If Bramble buys the part from an outside supplier, $60000 of the fixed overhead is avoidable. What is the relevant cost per unit of part A12E?

Answer 1

$78 is the Relevant cost per unit of part A12E when the Bramble Corp buys the part from an outside supplier.

Step-by-step explanation:

Relevant cost per unit of part A12E

Direct materials+Direct labor +Variable overhead +

(Fixed overhead - Avoidable fixed overhead )

= $ 50000 + $155000 +$70000 + $115,000 ($175000 - $60000)

`= $ 50000 + $155000 +$70000 + $115,000 ($175000 - $60000)`

= 390,000 ÷ 5000 units = $78

`= 390,000 ÷ 5000 units = $78`

Relevant cost per unit of part A12E is $78 when the Bramble Corp buys the part from an outside supplier.