Answer:
The $31,800 is the cost which is avoidable if Ted outsources production of this product.
Explanation:
Since, the Ted company is outsourcing the production of Product AXP, so the variable cost or we can say the raw material, direct labor cost, commissions, etc.
The variable cost is that cost which is change when production level is increased or decreased.
All other cost like fixed cost such as fixed overhead cost, depreciation, etc should be recognized in outsourcing.
In mathematically,
Variable cost = Raw material cost + direct labor cost
= $26,000 + $5,800
= $31,800
Thus, the variable cost is $31,800
Hence, the $31,800 is the cost which is avoidable if Ted outsources production of this product.
