Answered: Buddy Pets has recently started to…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 14E: A company has prepared the following statistics regarding its production and sales at different...

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Question

Buddy Pets has recently started to manufacture talking toy pets.
The cost structure to manufacture 13,700 of these toy pets is as follows:

Direct materials ($32 per pet)		$438,400
Direct labour ($26 per pet)		356,200
Variable overhead ($13 per pet)		178,100
Allocated fixed overhead ($24 per pet)		328,800
Total		$1,301,500

Buddy Pets is approached by Maxum Inc., which offers to make the toy pets for $84 per unit.

Using incremental analysis, determine whether Buddy Pets should accept this offer under each of the following independent assumptions:

Please dont provide solutions image based thanx

Prepare an incremental analysis. Assume that $164,400 of the fixed overhead cost (in making 13,700 of the toy pets) is
avoidable. (Enter savings with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).)
Cost
Total annual cost
+A
$
Make
tA
Buy
Cost (Saving)

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