Assume that Ranoosh Co. reports the following costs to make 18.5 oz bottle for its juice Cocktails: Ranoosh Company of Making 18.5 Ounce Glass Bottles Total Cost for 500,000 Bottles Cost per Bottle DM $ 80,000 $0.16 DL 30,000 0.06 Variable MOH 60,000 0.12 Fixed MOH 85,000 0.17 Total Costs $ 255,000 $ 0.51 Another manufacturer offers to sell Ranoosh the bottles for $0.50. The capacity now used to make bottles will become idle if the company purchases the bottles. Further, one supervisor with a salary of 25,000, a fixed cost, would be eliminated if the bottles were purchased. Instructions:

1. Prepare a schedule that compares the cost to make and buy the 18.5 oz. Should Ranoosh make or buy the bottles? (8 marks)

2. Now, suppose instead Ranoosh can use the released facilities in some other manufacturing activity that generate an additional contribution margin of $25,000 or can rent them out for $40,000.

Prepare a schedule that compares the four alternative courses of action. Which alternative would yield the lowest net cost? (6 marks)

Answer rating: 100% (QA)

To solve such problem find out the avoidable cost per onit 1 Find out the avoidable cost per onit 2 ... View the full answer