Finance question

The Bridgeport Company manufactures 5,900 units of a part that could
be purchased from an outside supplier for $16 each. Bridgeport’s costs to manufacture each part are as follows:

Direct materials$4
Direct labor 3
Variable manufacturing overhead 6
Fixed manufacturing overhead 10
Total $23

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) Calculate relevant cost to make.

Relevent cost to make $ per unit

(b) Should Bridgeport continue to manufacture the part?


Sample Solution