Auto Manufacturing has been making all its components internally. It uses 20,000 of component A1 yearly...

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Auto Manufacturing has been making all its components internally. It uses 20,000 of component A1 yearly and the manufacturing cost per unit of this component is as follows: (i) Direct material Direct labour Variable overhead Fixed overhead An outside supplier has offered to supply component Al to Auto Manufacturing at $5 per unit. Required: (ii) $2.80 $1.40 $0.20 $1.60 Should Auto Manufacturing buy the component from the outside supplier or continue to make it internally when 40% of the fixed overhead can be avoided if Auto Manufacturing stops producing this component? (6 marks) List TWO (2) qualitative considerations that Auto Manufacturing should consider when making the decision. (3 marks) Auto Manufacturing has been making all its components internally. It uses 20,000 of component A1 yearly and the manufacturing cost per unit of this component is as follows: (i) Direct material Direct labour Variable overhead Fixed overhead An outside supplier has offered to supply component Al to Auto Manufacturing at $5 per unit. Required: (ii) $2.80 $1.40 $0.20 $1.60 Should Auto Manufacturing buy the component from the outside supplier or continue to make it internally when 40% of the fixed overhead can be avoided if Auto Manufacturing stops producing this component? (6 marks) List TWO (2) qualitative considerations that Auto Manufacturing should consider when making the decision. (3 marks)

Answer rating: 100% (QA)

i To determine whether Auto Manufacturing should buy the component from the outside supplier or cont... View the full answer