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.

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.