a) The manager of South East Finance is evaluating whether the company's quarterly newsletter to its clients should continue to be produced in-house or whether it should be outsourced to a firm that specialises in producing newsletters for the finance industry.
If the newsletter remains in-house the costs per quarter are $8000 for printing, $10 000 for direct labour and $4000 in overhead. The overhead consists of a portion of the departmental supervisor's salary which is allocated to the newsletter on the basis of direct labour hours. If the report is produced externally it will cost $3.50 per newsletter for the 4000 copies needed per quarter.
Required:
i) Is it cheaper for the newsletter to be produced in-house or outsourced? Show calculations to support your answer.
ii) Give a reason why any of the above information is not a relevant cost in the decision.
b) Healthy Juices produces two products, Black current Juice and Orange and Mango for which the following estimated information is available for 2014.

Required:
Calculate the number of cartons (in total and per product) Healthy Juices would need to sell to breakeven in 2014.

Transcribed Image Text:

Blackcurrent Juice Orange & Mango Sales in cartons Selling price per carton Variable costs per carton Annual total fixed costs $180 000 50000 $5.00 $2.00 100000 $4.50 S1.80