Hi John, Question 138 use Variable cost per unit compare with Purchasing cost per unit to find out the saving $ of purchasing. Why we don’t use total cost of making the product (means including the fixed cost per unit) because in the question it doesn’t state whether or not this fixed cost is apportioned generally or this is incremented by producing this new drug? Thank you!!!
Given the nature of the business (research based and manufacturing a wide range of drugs) it is reasonable to assume that the fixed overheads are simply an apportionment of the total fixed overheads for the company.