Question 2 (30 marks) 1. XYZ Company reports the following per unit cost information for making...

 

Transcribed Image Text:

Question 2 (30 marks) 1. XYZ Company reports the following per unit cost information for making 12-ounce Glass Bottles: Direct materials Direct labour Variable Overhead Fixed Overhead Total Cost Cost per Bottle GH20.06 0.02 0.04 0.08 0.20 The Company currently produces 1,000,000 12-ounce glass bottles. Another manufacturer offers to sell XYZ the bottles for 0.18 per bottle. For the moment, suppose the capacity now used to make bottles will become idle if the company purchases the bottles. Further, the €50,000 supervisor's salary is the only fixed cost that the company would eliminate. Required: 12 marks a) Should XYZ make or buy the bottles? Show your analysis b) Describe three qualitative factors XYZ Company management should take into consideration before taking a decision to purchase the bottles from the outside supplier. 3 marks Question 2 (30 marks) 1. XYZ Company reports the following per unit cost information for making 12-ounce Glass Bottles: Direct materials Direct labour Variable Overhead Fixed Overhead Total Cost Cost per Bottle GH20.06 0.02 0.04 0.08 0.20 The Company currently produces 1,000,000 12-ounce glass bottles. Another manufacturer offers to sell XYZ the bottles for 0.18 per bottle. For the moment, suppose the capacity now used to make bottles will become idle if the company purchases the bottles. Further, the €50,000 supervisor's salary is the only fixed cost that the company would eliminate. Required: 12 marks a) Should XYZ make or buy the bottles? Show your analysis b) Describe three qualitative factors XYZ Company management should take into consideration before taking a decision to purchase the bottles from the outside supplier. 3 marks

Answer rating: 100% (QA)

Make or buy decisions are taken by the entities when there are multiple options available in order t... View the full answer