Blagojevic Ltd manufactures hard disk recorders for television and makes all parts for the machines, including the
Question:
Blagojevic Ltd manufactures hard disk recorders for television and makes all parts for the machines, including the outside casing. The cost per unit of the casings at a production level of 150000 units is as follows:
Direct labour Direct materials Variable factory overhead Fixed factory overhead | $8.00 6.00 24.00 8.00 | |
Total unit cost | $46.00 |
The fixed factory overhead cost is direct, and half of the direct fixed overhead cost could be eliminated if the casings are purchased rather than produced. An outside supplier has offered to produce and sell to Blagojevic Ltd 150000 casings at a price of $40 per unit.
Required
Should the offer be accepted if there are no alternative uses for the manufacturing capacity currently being used to produce the casings? Why?
Step by Step Answer:
Avoidable costs per unit Make Buy Difference Dir...View the full answer
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
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