Question

8-8 Outsourcing (LO 3) The Outland Company manufactures 1,000 units of a part that could be purchased from an outside supplier for $12 each. Outland's costs to manufacture each part are as follows:
Direct materials $ 2

Direct labor 3

Variable manufacturing overhead 4

Fixed manufacturing overhead 8

Total $17


All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses.


Calculate relevant cost to make Relevent cost to make.

Answer 1

Answer:

relevant cost to make are $9.00

Explanation:

Consider the avoidable costs only because they are relevant for this decision.

Direct materials                                $2 .00

Direct labor                                       $3 .00

Variable manufacturing overhead  $4 .00

Total                                                  $9.00