Sitara & Co. manufactures Part No. F-1700 for use in its assembly operation. The annual requirements...

Transcribed Image Text:

Sitara & Co. manufactures Part No. F-1700 for use in its assembly operation. The annual requirements are 5,000 units and the cost per unit is as follows. Rs. Direct material Direct labour 20 120 Variable factory overhead Fixed factory overhead Total cost per unit 50 70 260 Hilal Enterprises has offered to sell Sitara & Co. 5,000 units of F-1700 at Rs. 270 each. If Sitara & Co. accepts this offer, some of the facilities used to manufacture Part F- 1700 could be used to help the manufacture another Pari S-1200, thus saving annually Rs. 40,000 in relevant cost in its manufacture and eliminating Rs. 30 per units of the fixed factory overheads applied to part F-1700. Required:- Advise Sitara & Co. whether to manufacture or buy Part F-1700. Sitara & Co. manufactures Part No. F-1700 for use in its assembly operation. The annual requirements are 5,000 units and the cost per unit is as follows. Rs. Direct material Direct labour 20 120 Variable factory overhead Fixed factory overhead Total cost per unit 50 70 260 Hilal Enterprises has offered to sell Sitara & Co. 5,000 units of F-1700 at Rs. 270 each. If Sitara & Co. accepts this offer, some of the facilities used to manufacture Part F- 1700 could be used to help the manufacture another Pari S-1200, thus saving annually Rs. 40,000 in relevant cost in its manufacture and eliminating Rs. 30 per units of the fixed factory overheads applied to part F-1700. Required:- Advise Sitara & Co. whether to manufacture or buy Part F-1700.

Answer rating: 100% (QA)

Answer The decision to whether ... View the full answer