ORION Direct labor Variable manufacturing overhead 3 Fixed m

ORION Direct labor Variable manufacturing overhead 3 Fixed manufacturing overhead9 Total All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses. (a) C Relevent cost to make (b) Should Marigold continue to manufacture the part? $18 s per unit LINK TO TEXT

Solution

Make part

Since, its relevant cost $9 lower than its purchase cost $14 , it will be better to keep manufacturing the parts by Marigold

Solution:
a.	Relevant cost to make   $9    per unit
Working Notes:
	Computation relevant cost per unit
	Direct materials	$2
	Direct labor	$4
	variable manufacturing OH	$3
	Fixed mfg. OH [Working notes see]	0
	Relevant cost per unit	$9
	Fixed mfg. OH is unavoidable fixed cost means, they are sunk cost which incurred whether it manufactured or purchased from outside, so it is not relevant cost.
b.	Yes
Working Notes:
	Make part Since, its relevant cost $9 lower than its purchase cost $14 , it will be better to keep manufacturing the parts by Marigold
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