Relevent costing
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Outsourcing switches for $20 bucks each. The Co is considering making the switches internally and has conducted a study to determine the costs involved. Below are projected annual production costs:
Unit level material costs $3.00
Unit level; labor costs $2.00
Unit level overhead costs $1.00
Batch level costs (5,000 units per batch) $5,000
Production level supervisory salaries $37,500
Allocated facility level costs $20,000
The Co needs 10,000 switches, which would be produced in two batches. Assume that the Co will still be operating within relevant range. If the Co decides to make the parts under these conditions, the total relevant costs will be:
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Solution Summary
Solution explains how to calculate total relevant cost of the product.
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