The Pleasantville Company makes 20,000 units per year of a part used in production.The unit product cost is as follows: $\begin{array}{lr}
\text { Direct materials } & \$ 6.20 \
\text { Direct labor } & 2.30 \
\text { Variable Manufacturing Overhead } & 1.20 \
\text { Fixed Manufacturing Overhead } & .80\
\text { Unit product cost }&\$10.50
\end{array}$ An outside supplier has offered to sell the company the same part at a cost of $9.00 per unit.If the company purchases the part only half of the fixed overhead would be avoided.How much of the unit product cost is relevant in making this decision?

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The Answer of The Pleasantville Company makes 20,000 units per year of a part used in production.The unit product cost is as follows: $\begin{array}{lr}
\text { Direct materials } & \$ 6.20 \
\text { Direct labor } & 2.30 \
\text { Variable Manufacturing Overhead } & 1.20 \
\text { Fixed Manufacturing Overhead } & .80\
\text { Unit product cost }&\$10.50
\end{array}$ An outside supplier has offered to sell the company the same part at a cost of $9.00 per unit.If the company purchases the part only half of the fixed overhead would be avoided.How much of the unit product cost is relevant in making this decision?

The Pleasantville Company Makes 20,000 Units Per Year of a Part