An outside manufacturer offered to produce and ship Daks directly to Andretti. The relevant unit cost for comparing the outside manufacturer's quote is $24.45, which includes direct materials of $10, direct labor of $4.50, variable manufacturing overhead of $2.30, fixed manufacturing overhead of $3.75, variable selling expenses of $0.40, and avoidable fixed selling expenses of $3.50.

1. An outside manufacturer has offered to produce Daks and ship them directly to Andretti
Solution
The unit cost that is relevant for comparison to the price quoted by the outside manufacturer
Answer
Unit cost that is relevant for comparison to the price quoted by the outside manufacturer =
$ 24.45
Direct materials 10.00
Direct labor 4.50
Variable manufacturing overhead 2.30
Fixed manufacturing overhead (5*75%) 3.75
Variable selling expenses ( 1.20 - 2/3*1.20) 0.40
Fixed selling expenses (Avoiidable) 3.50
Total Relevant cost per unit 24.45