Question

26 . Alpha Co. can produce a unit of Beta for the following costs: Direct Material $4 Direct Labor 12 Overhead 20 TOTAL $36 An outside supplier offers to provide Alpha with all the Beta units it needs at $30 per unit. If Alpha buys from the supplier, Alpha will still incur 50% of its overhead. The proper decision and the total relevant cost to compare with the $30 purchase price are:

Answer 1

b. Make, $26

Step-by-step explanation:

Options are "A. Buy, $26. B. Make, $26. C. Buy, $36. D. Make, $36 E. Buy, $40"

Calculation of total relevant cost

Direct materials $4

Direct labor $12

Overhead $10 ($20 * 50%)

Total relevant cost $26

Since the relevant cost is $26 when making, so the proper decision and the total relevant cost to compare with the $30 purchase price are "Make, $26".