Herman Limited makes a product, P. It sells for $55 each. The sales budget for Year...

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Herman Limited makes a product, P. It sells for $55 each. The sales budget for Year X shows that the company expects to sell 4,000 units of P.. 2 The manufacturing cost per unit for the product in Year X is expected to be: Materials Conversion cost The product is made in one cost centre, the conversion cost rate per hour being $14.80. The cost center budget for Year X is: > Variable costs Operating labour S 35.00 17.76 52.76 Other costs Fixed costs Two supervisors Other costs S 74,400 18,000 30,000 55,200 177,600 These budgets reflect the normal annual sales of P and of other products made in this cost centre. If the utilization of the cost centre falls to 60% on a regular basis, then one supervisor could be made redundant. A small local company, Ferris Limited, has offered to manufacture product P for $47 each. > Required: Prepare calculations to show whether P should be manufactured or purchased.. Herman Limited makes a product, P. It sells for $55 each. The sales budget for Year X shows that the company expects to sell 4,000 units of P.. 2 The manufacturing cost per unit for the product in Year X is expected to be: Materials Conversion cost The product is made in one cost centre, the conversion cost rate per hour being $14.80. The cost center budget for Year X is: > Variable costs Operating labour S 35.00 17.76 52.76 Other costs Fixed costs Two supervisors Other costs S 74,400 18,000 30,000 55,200 177,600 These budgets reflect the normal annual sales of P and of other products made in this cost centre. If the utilization of the cost centre falls to 60% on a regular basis, then one supervisor could be made redundant. A small local company, Ferris Limited, has offered to manufacture product P for $47 each. > Required: Prepare calculations to show whether P should be manufactured or purchased..

Answer rating: 100% (QA)

To determine whether Herman Limited should manufacture or purchase product P we need to compare the total cost of manufacturing with the cost of purch... View the full answer