Penguin Company needs 10,000 units of Part A to use in one of its products. The following
Question:
Penguin Company needs 10,000 units of Part A to use in one of its products. The following information is available:??
Cost to Penguin to make Part A:??
Direct Materials | $6 |
Direct Labour | $14 |
Variable Manufacturing Overhead | $7 |
Fixed Manufacturing Overhead | $10 |
Total Manufacturing Cost Per Unit | $37 |
Giraffe Company has offered to sell Part A to Penguin Company for $36. If Penguin were to buy Part A from Giraffe instead of making it, 40% of the fixed manufacturing overhead costs would continue. If Penguin were to buy Part A from Giraffe, Penguin would be able to use the manufacturing facility to produce Part B that would generate a segment margin of $20,000.
Should Penguin make Part A or purchase from Giraffe? (Show all calculations)
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook