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MC Question 1
A company is making product P with the following cost card:
| $ | $ | |
|---|---|---|
| Selling price | 100 | |
| Material | 25 | |
| Labour | 30 | |
| Variable overheads | 20 | |
| Fixed overheads | 10 | |
| (85) | ||
| Profit | 15 |
Each unit of P takes one hour to make and the available labour and machinery are fully used in its current production of P. The company is considering making a new product, Q, but would have to divert labour and machine use from product P.
What is the relevant total cost per hour for labour and variable overheads which should be included in the cost of product q?
A. $25
B. $75
C. $50
D. $65