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$ 5.00Direct labor12.00Manufacturing overhead (50% fixed)10.00Total manufacturing costs$27.00

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

Relevant Cost Information:

In the context of managerial accounting, any business decision is made based on relevant costs. The costs that determine the differences between the available alternatives are relevant. Thus, they are directly involved and are responsible for affecting business decisions.