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Assume that Nantucket Nectars reports the following costs: Nantucket Nectars Company of Making 12-Ounce Glass Bottles (1000,000 units)    Total Cost for 1,000,000 Bottles Cost per Bottle DM $ 60,000 $0.06 DL    20,000   0.02 Variable MOH     40,000   0.04 Fixed MOH     80,000   0.08 Total Costs $ 200,000 $ 0.20   Another manufacturer offers to sell Nantucket Nectars the bottles for $0.18. Should Nantucket Nectars make or buy the bottles? How to make this decision Compare: prices from outside supplier versus the relevant cost Price from outside = 0.18 TC = 0.20 Benefit of buying it with another supplier = 0.02 Benefit = 20,000 and hence should buy bottles

Assume that Nantucket Nectars reports the following costs: Nantucket Nectars Company of Making 12-Ounce Glass Bottles (1000,000 units)    Total Cost for 1,000,000 Bottles Cost per Bottle DM $ 60,000 $0.06 DL    20,000   0.02 Variable MOH     40,000   0.04 Fixed MOH     80,000   0.08 Total Costs $ 200,000 $ 0.20   Another manufacturer offers to sell Nantucket Nectars the bottles for $0.18. Should Nantucket Nectars make or buy the bottles? How to make this decision Compare: prices from outside supplier versus the relevant cost Price from outside = 0.18 TC = 0.20 Benefit of buying it with another supplier = 0.02 Benefit = 20,000 and hence should buy bottles

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 20E
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Assume that Nantucket Nectars reports the following costs: Nantucket Nectars Company of Making 12-Ounce Glass Bottles (1000,000 units)    Total Cost for 1,000,000 Bottles Cost per Bottle DM $ 60,000 $0.06 DL    20,000   0.02 Variable MOH     40,000   0.04 Fixed MOH     80,000   0.08 Total Costs $ 200,000 $ 0.20   Another manufacturer offers to sell Nantucket Nectars the bottles for $0.18. Should Nantucket Nectars make or buy the bottles? How to make this decision Compare: prices from outside supplier versus the relevant cost Price from outside = 0.18 TC = 0.20 Benefit of buying it with another supplier = 0.02 Benefit = 20,000 and hence should buy bottles  
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