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Aleksandr-060686 [28]
3 years ago
14

Epsilon currently pays $94 per unit to buy a part for a product it sells. Epsilon has excess capacity, and estimates that making

the part would incur variable costs of $8 for direct materials and $58 for direct labor. Epsilon's normal predetermined overhead rate is 150% of direct labor cost, but management computes an incremental overhead rate of $23.20 per unit to make this part. Epsilon should choose to:
Business
1 answer:
devlian [24]3 years ago
7 0

Answer:

Make as the relevant cost to make is $89.20 per unit.

Explanation:

Calculation to determine what Epsilon should choose to:

Using this formula

Relevant cost to make= Direct material + Direct labor+Incremental overhead.

Let plug in the formula

Total Relevant cost to make=$8.00 +$58.00+$ 23.20

Total relevant cost to make$89.20

Therefore Epsilon should choose to:Make as the relevant cost to make is $89.20 per unit.

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