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find the variable cost of an airplane

Tom Terry manufactures an intricately detailed plastic and metal toy airplane. The following unit cost data pertain to the unit cost of an airplane:

Direct materials $ 5.00
Direct labor 12.00
Manufacturing overhead (50% fixed) 10.00
Total manufacturing costs $27.00
Please show work:

Assume that the airplane can be purchased from an outside supplier. What is the relevant unit cost for this make-or-buy decision?
a. $5
b. $17
c. $27
d. $22
e. none of the above. Please provide the correct answer.

Solution Preview

d. $22
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<br>Actually we are to find the variable cost of an ...

Solution Summary

What is the relevant unit cost for this make-or-buy decision?

$2.19