Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: $$\begin{array} { l c }
\text { Direct materials and direct labour } & \$ 11.00 \
\text { Variable overhead } & 3.00 \
\text { Fixed overhead } & \underline { 8.00} \
\text { Total } & \$ \underline { 2 2 . 0 0 }
\end{array}$$ The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?
A)$24.00
B)$14.00
C)$11.00
D)$19.00

Question

Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: $$\begin{array} { l c } 
\text { Direct materials and direct labour } & \$ 11.00 \
\text { Variable overhead } & 3.00 \
\text { Fixed overhead } & \underline { 8.00} \
\text { Total } & \$ \underline { 2 2 . 0 0 }
\end{array}$$ The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?
A)$24.00
B)$14.00
C)$11.00
D)$19.00

Quizplus · Accepted Answer

The relevant cost of the wicket includes only the costs that will change if the production level changes, which are direct materials, direct labor, and variable overhead, totaling $14.00 ($11.00 for materials and labor + $3.00 for variable overhead). Fixed overhead is not considered relevant because it does not change with the production level of the wicket.

Truckel, Inc The Fixed Overhead Is an Allocated Common Cost