Flowers Ltd. prepares and sells large flower bouquets for all occasions. Currently, workers at the production...

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Flowers Ltd. prepares and sells large flower bouquets for all occasions. Currently, workers at the production shop produce baskets that are used in each flower arrangements. Based on annual sales of 15,000 units, Flowers Ltd. incurs the following costs: Fixed manufacturing costs Variable costs per unit: Direct materials Direct labour Variable overhead $120,000 $22.40 $4.20 $19.60 Recently, the owner of Flowers Ltd. was approached by another company offering to sell pre- made baskets to Flowers Inc. at a cost of $17.60 each. If Flowers Ltd. buys baskets from the vendor, they will reduce variable labour costs and variable overhead costs by 50%; however, the company will still need to use $5.60 of direct materials in the preparation of each flower arrangement. Required (A) Should Flowers Ltd. accept the offer and buy baskets from the vendor? Support your recommendation with calculations. (B) What other factors should companies consider before deciding whether to outsource production to an outside vendor? Flowers Ltd. prepares and sells large flower bouquets for all occasions. Currently, workers at the production shop produce baskets that are used in each flower arrangements. Based on annual sales of 15,000 units, Flowers Ltd. incurs the following costs: Fixed manufacturing costs Variable costs per unit: Direct materials Direct labour Variable overhead $120,000 $22.40 $4.20 $19.60 Recently, the owner of Flowers Ltd. was approached by another company offering to sell pre- made baskets to Flowers Inc. at a cost of $17.60 each. If Flowers Ltd. buys baskets from the vendor, they will reduce variable labour costs and variable overhead costs by 50%; however, the company will still need to use $5.60 of direct materials in the preparation of each flower arrangement. Required (A) Should Flowers Ltd. accept the offer and buy baskets from the vendor? Support your recommendation with calculations. (B) What other factors should companies consider before deciding whether to outsource production to an outside vendor?

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