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3 years ago

The following standard costs pertain to a component part manufactured by Bor Co.:

Business

1 answer:

larisa [96]3 years ago

3 0

Answer:

Relevant cost= $30

Explanation:

Giving the following information:

Direct materials $4

Direct labor 10

Factory overhead 40

Standard cost per unit $54

Fixed cost is 60% of applied factory overhead, and is not affected by any make or buy decision.

<u>The relevant cost in a "make or buy" decision is the cost that can be avoided. Therefore, the fixed manufacturing cost is not relevant.</u>

<u></u>

Relevant overhead= 40*0.4= $16

Relevant cost= 4 + 10 + 16

Relevant cost= $30

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Consider the demand equation q=20,000 p^(-1.4). if the cost of production is constant at $0.50 per unit $1.75 is the optimal price to maximize profit.

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Calculation,

The demand equation q=20,000 p^(-1.4)

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