Question
Waverly Company Ltd. currently produces 8,000 units per year of SB 200 (snowboard), which is a component of the company's major products. SB 200 has
Waverly Company Ltd. currently produces 8,000 units per year of SB 200 (snowboard), which is a component of the company's major products. SB 200 has the following unit cots
Direct materials - $35.50
Direct labour - 20.00
Indirect costs
- indirect labour (variable) - 7.75
- Heat and power (variable) - 2.25
- Fixed overhead - 38.50
total cost per unit - $104.00
Waverly expects future annual demand for SB 200 to increase to 11,000 units starting next year, which present capacity. A supplier has offered to supply 11,000 units of SB 200 at $89 per unit. If Waverly decided to purchase the required sb 200, they can avoid fixed cost of $9.50 per unit based on the current production of 8,000 units per year
Required
- should wavily company subcontract the production of SB 200? show calculations
- assume that wavily could rent out the vacant area resulting from discontinuing production of SB 200 for $225,000 per year. does this change the descsion you made in question 1
- Explain any two qualitative factors the would also be relevant to the decision to make or buy SB 200
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