Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: $$\begin{array} { l r }
\text { Direct materials and direct labour } & \$ 11.00 \
\text { Variable overhead } & 3.00 \
\text { Fixed overhead } & \$ 2.00 \
\text { Total } & \$ 22.00
\end{array}$$ 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: $$\begin{array} { l r } 
\text { Direct materials and direct labour } & \$ 11.00 \
\text { Variable overhead } & 3.00 \
\text { Fixed overhead } & \$ 2.00 \
\text { Total } & \$ 22.00
\end{array}$$ 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

Fixed overhead is not relevant for decision making as it will occur regardless of the decision. Therefore, the relevant cost is $22.00 - $2.00 = $14.00.

Truckel, Inc The Fixed Overhead Is an Allocated Common Cost