Answer (C) is correct . The cost of the unsalable units in Operation?1 consists solely of the wasted direct materials because idle capacity is available to replace the defective units. As a consequence, Operation 1 can still transfer the maximum 150,000 units that Operation 2 can process, and no throughput contribution is lost. The cost of the unsalable units in Operation 1 is thus $24,000 (500 units × $48 DM). In Operation 2, however, the lost throughput contribution is an opportunity cost because no idle capacity exists to replace the defective units. The cost of the unsalable units in Operation 2 is $60,000 {(500 units × $48 DM) + [500 units × ($120 unit price – $48 DM cost)]}. Hence, the total relevant cost of the unsalable units is $84,000 ($24,000 + $60,000).
Answer (A) is incorrect because The direct materials cost of 500?units equals $24,000.
Answer (B) is incorrect because The lost throughput contribution and wasted direct materials cost of 500?units equals $60,000.
Answer (D) is incorrect because The lost throughput contribution and wasted direct materials cost of 1,000?units equals $120,000.
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Operation 1 produces 500 unsalable units and Operation 2 also produces 500 unsalable units. The relevant cost of the unsalable units to Rosecrans is