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Vaughn Manufacturing produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 55000 Direct labor 160000 Variable overhead 75000 Fixed overhead 175000 If Vaughn buys the part from an outside supplier, $65000 of the fixed overhead is avoidable. What is the relevant cost per unit of part A12E?

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Cricetus

Answer:

"$71" is the correct answer.

Explanation:

Given:

Number of units,

= 5,000

Direct material,

= 55,000

Direct labor,

= 160,000

Variable overhead,

= 75,000

Fixed overhead,

= 65,000

Now,

The total relevant costs will be:

= [tex]Direct \ materials+Direct \ labor+Variable \ overhead+Fixed \ overhead[/tex]

= [tex]55,000+160,000+75,000+65,000[/tex]

= [tex]355,000[/tex] ($)

hence,

The relevant cost per unit will be:

= [tex]\frac{Total \ relevant \ costs}{Number \ of \ units}[/tex]

= [tex]\frac{355,000}{5,000}[/tex]

= [tex]71[/tex] ($)

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