Question

0 The following are Silver Corporation's unit costs of making and selling an tem at a volume of 8300 units per month twhich represents the company's capacity Manufacturing: Direct materials Direct labor $ 1.60 $ 2.60 $ 1.10 S 0.70 Variable overhead Fixed overhead Selling and adeinistrative: Variable $ 2.60 $ 1.10 Fixed Present sales amount to 6.500 units per month An order has been received from a customer in a foreign market for 1600 units. The order would not affect regular sales. Total fixed costs, both manufacturing andt selling and administrative, would not be affected by this order. The variable selling and administrative costs would have to be incured for this special order as well as all other sales Assume that direct labor is a variable cost. Assume the company has 80 unts left over from last year which have small defects and which will have to be sold at a reduced price for scrap The sale of these defective units will have no effect on the compare other sales. Which of the following costs is relevant in this decision? Multiple Choice $970 full cos $260 veriable selling and administrative cost

Answer 1

The relevant cost in the decision is variable selling and administrative expense.

Manufacturing costs have already been incurred and are not relevant in decision to sell.

$2.60 variable selling and administrative cost is correct option