ABC company manufactures Part No. 1001 for the use in its tractor assembly operation. Cost per unit for 5000 units of Part No. 1001 is a total of P500 from the following: Direct Labor Direct Material = P110 Fixed Factory Overhead = P140 Variable Factory Overhead = P120 XYZ company offered to sell ABC Co. 5000 units of Part No. 10ó1 for P510 each. If ABC Co. accepts, some of its facilities presently used to manufacture of Part No. 1001 could be used to help with the manufacture of Part No. 1001, thus saving P360,000 in relevant cost in its manufacture of Part No. 1001. Will ABC company decide to make or buy? How much is the savings from buying instead of making? P130
ABC company manufactures Part No. 1001 for the use in its tractor assembly operation. Cost per unit for 5000 units of Part No. 1001 is a total of P500 from the following: Direct Labor Direct Material = P110 Fixed Factory Overhead = P140 Variable Factory Overhead = P120 XYZ company offered to sell ABC Co. 5000 units of Part No. 10ó1 for P510 each. If ABC Co. accepts, some of its facilities presently used to manufacture of Part No. 1001 could be used to help with the manufacture of Part No. 1001, thus saving P360,000 in relevant cost in its manufacture of Part No. 1001. Will ABC company decide to make or buy? How much is the savings from buying instead of making? P130
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...
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