Question
sales$32.00 Direct materials$10.00 Direct labor$4.50 Variable manufacturing Overhead$2.30 Fixed manufacturing overhead$5.00 Variable selling expense$1.20 fixed selling expense$3.50 Total cost per unit$26.50 An outside manufacturer has
sales$32.00
Direct materials$10.00
Direct labor$4.50
Variable manufacturing Overhead$2.30
Fixed manufacturing overhead$5.00
Variable selling expense$1.20
fixed selling expense$3.50
Total cost per unit$26.50
An outside manufacturer has offered to produce units and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce units would be idle; however, fixed manufacturing overhead costs would be reduced by 75%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer.
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