Mo Furniture manufactures a frame for use in its production of sofas. When 10,000 frames are produced, the costs per unit are:Direct materials$ 12Direct manufacturing labor60Variable manufacturing overhead24Fixed manufacturing overhead32Total$128A company has offered to sell Mo Furniture 10,000 sofa frames for $120 per unit. Fixed manufacturing overhead of $20 per unit used to make the frame could be eliminated if the frames were purchased instead of made. What is the relevant cost per unit to make the frame in this make or buy decision?

A cost is said to be a relevant cost when its presence or increase or decrease affects the decision…

Answered: Mo Furniture manufactures a frame for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mo Furniture manufactures a frame for use in its production of sofas. When 10,000 frames are produced, the costs per unit are:

Direct materials	$ 12
Direct manufacturing labor	60
Variable manufacturing overhead	24
Fixed manufacturing overhead	32
Total	$128

A company has offered to sell Mo Furniture 10,000 sofa frames for $120 per unit. Fixed manufacturing overhead of $20 per unit used to make the frame could be eliminated if the frames were purchased instead of made. What is the relevant cost per unit to make the frame in this make or buy decision?

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