The relevant unit cost will be the variable costs per unit plus the specialized procurement costs per unit. This answer includes fixed costs as well.
The relevant unit cost will be the variable costs per unit plus the specialized procurement costs per unit. This answer does not include the specialized procurement costs per unit.
The relevant unit cost will be the variable costs per unit plus the specialized procurement costs per unit. This answer does not include the specialized procurement costs per unit and it also includes too much administrative costs per unit as we are told in the question that administrative costs for this order are $2 less than usual.
The relevant unit cost will be the variable costs per unit plus the specialized procurement costs per unit. Variable costs per unit, adjusted for the fact that only one-half of the variable costs associated with the administrative area will be incurred, are: Direct material $3.50 Direct labor 9.00 Packaging 2.00 Variable manufacturing O/H 3.00 Variable marketing costs 2.50 Variable administrative costs 2.00 Total variable costs $22.00 Specialized procurement costs will be $150,000 in total. On a per-unit basis, this equals $3 per unit ($150,000 ÷ 50,000 units). Therefore, the total relevant cost per unit to be considered by National in making a decision on this offer is $22 variable costs plus $3 fixed costs, for a total of $25.
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A foreign company recently approached National with an order of 50,000 units of a specially designed component at $35 per unit. The order will require specialized procurement costs of $150,000 and only one-half of the variable costs associated with the administrative area will be needed. Otherwise, cost behavior will remain the same. Adequate capacity is available to handle this request. What is the relevant unit cost to be considered by National in making a decision on this offer?