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Managerial Accounting

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Moderate

Relevant Cost of Making

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The following costs pertain to a component part manufactured by Lindfield Company:

Direct materials -- \$3
Direct labor -- \$6
Factory overhead -- \$20

Factory overhead is applied at \$1.75 per direct labor hour. Fixed capacity cost is 60% of applied factory overhead and is not affected by a "make or buy" decision. It would cost \$22 per unit to buy the part from an outside supplier.

In the decision to "make or buy," what is the total relevant unit manufacturing cost to be considered?

A

$9

B

$17

C

$21

D

$29