Starbucks currently makes 32789 coffee a year. Starbucks manufactures all of the components. However, Starbucks is considering if it should buy the coffee cups from a supplier.

Direct materials: $ 5.9

Direct labor: $ .87

Variable OH: $ .40

Fixed OH: $ 21.80

An outside supplier has provided the purchase price of $8 total for the cups for the coffee. If the company accepts this, the company could utilize the production space to make another product which would increase their contribution margin by $15,000 a year. The company determined that 55% of fixed overhead is related to common overhead and will continue if the cups are bought.

What is the total annual advantage/disadvantage of buying the cups?

Answer rating: 100% (QA)

Hence the total annual advantage of buying the cups is ... View the full answer