Question

10) Genent's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars: $0.56 0.11 0.24 Direct materials Direct labor Unit-related support costs Batch-related support costs Product-sustaining support costs Facility-sustaining support costs Total cost per jar 0.30 0.53 0.56 $2.3 The relevant cost per jar is A) $1.74 per jar B) $0.91 per jar C) $2.30 per jar D) $0.67 per jar

Answer 1

All avoidable costs are relevant in the make or buy decision.

The relevant cost per jar is the total avoidable unit costs for the decorative jars which is $2.3

Option C $2.30 per jar is correct