Question

The Fine Point Company currently produces all of the components for its one product, an electric pencil sharpener. The unit cost of manufacturing the motor for this pencil sharpener is: Direct materials$1.75 Direct labor$1.65 Variable overhead$0.75 Fixed overhead$0.60 The company is considering the possibility of buying this motor from a subcontractor and has been quoted a price of $3.60 per unit. The relevant cost of manufacturing the motor to be considered in reaching the decision is:

Answer 1

$4.15 per unit

Step-by-step explanation:

The computation of the relevant cost of manufacturing the motor is shown below:

Relevant cost per unit = Direct material per unit + direct labor per unit + variable overhead per unit

= $1.75 + $1.65 + $0.75

= $4.15 per unit

For reaching the decision, we simply added the direct material per unit, direct labor per unit and variable overhead per unit so that the correct answer could arrive