1. (20 pts) Sunshine Fruit Co. makes its own shipping boxes. The annual cost to make...

 
 

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1. (20 pts) Sunshine Fruit Co. makes its own shipping boxes. The annual cost to make 80,000 boxes is: Materials Labor Indirect Manufacturing Costs Variable Fixed $120,000 20,000 16,000 60,000 Total $216,000 Suppose Weyerhouser offers to sell them boxes for $2.10 per box a) Given the above, should Sunshine Fruit make or buy the boxes? b) Suppose that all the above fixed costs are depreciation for equipment which is at the end of its 10-year life and was purchased for $600,000. New replacement equipment will cost $800,000 and have a 10-year life also. Will this fact make a difference for the make or buy decision? 1. (20 pts) Sunshine Fruit Co. makes its own shipping boxes. The annual cost to make 80,000 boxes is: Materials Labor Indirect Manufacturing Costs Variable Fixed $120,000 20,000 16,000 60,000 Total $216,000 Suppose Weyerhouser offers to sell them boxes for $2.10 per box a) Given the above, should Sunshine Fruit make or buy the boxes? b) Suppose that all the above fixed costs are depreciation for equipment which is at the end of its 10-year life and was purchased for $600,000. New replacement equipment will cost $800,000 and have a 10-year life also. Will this fact make a difference for the make or buy decision?

Answer rating: 100% (QA)

a To determine whether Sunshine Fruit should make or buy the boxes we need to compare the total cost ... View the full answer