Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per unit, for 2
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Question:
Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per unit, for filters, are as follows.
Direct materials $
Direct labor
Variable overhead
Fixed overhead
Total costs $
Irrigation Products has offered to sell filters to Filtration for $ per filter. If Filtration accepts Irrigation Products offer, the facilities used to manufacture filters could be used to produce refrigerator filtration units. Revenues from the sale of refrigerator filtration units are estimated at $ with variable costs amounting to of sales. In addition, $ per unit of the fixed overhead associated with the manufacture of secondary water irrigation filters could be eliminated.
Compute the following:
Cost to make filters
Cost to buy filters
Should Filtration, Inc. accept Irrigation Products offer?
Yes, the cost to purchase the filters is less than the cost to make them.
No the cost to purchase the filters is more than the cost to make them.
Make or Buy
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