Travolta Company currently manufactures Hair Dryers. as its main product. The costs per unit are as follows:

Direct materials and direct labor $11

Variable overhead 5

Fixed overhead 8

Total $24

12. The fixed overhead is an allocated common cost. How much is the relevant cost to make the Hair Dryer?

13. Sarah Lee Company has contacted Travolta with an offer to sell it 5,000 of the Hair Dryers for $18 each. If Travolta makes the hairdryers, variable costs are $16 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. How much is the cost savings of buying?