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Calculate total relevant cost and net relevant cost to buy

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Question - Every year Novak Industries manufactures 7,400 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows:

Direct materials $3.00

Direct labor 9.00

Variable manufacturing overhead 7.00

Fixed manufacturing overhead 10.00

Total $29.00

Blossom, Inc., has offered to sell 7,400 units of part 231 to Novak for $32 per unit. If Novak accepts Blossom's offer, its freed-up facilities could be used to earn $12,900 in contribution margin by manufacturing part 240. In addition, Novak would eliminate 50% of the fixed overhead applied to part 231.

Required - Calculate the total relevant cost and net relevant cost to buy?

Reference no: EM132996904

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