Burmy Company has contacted Stufful with an offer to sell them 5,000 of the subassemblies for P22.00 each. Stufful will eliminate P25,000 of fixed overhead if it accepts the proposal. Should Stufful make or buy the subassemblies? What is the difference between the two alternatives? O Make; savings = P60,000 O Buy; savings = P20,000 O Make; savings = P5,000 O Buy; savings = P50,000

Principles of Accounting Volume 2
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Chapter6: Activity-based, Variable, And Absorption Costing
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Problem 14EB: Crafts 4 All has these costs associated with production of 12,000 units of accessory products:...
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Stufful Corporation currently manufactures a subassembly for its
main product. The costs per unit are as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total
P 1.00
O Make; savings = P60,000
O Buy; savings = P20,000
O Make; savings = $5,000
O Buy; savings = P50,000
10.00
5.00
8.00
P24.00
Burmy Company has contacted Stufful with an offer to sell them
5,000 of the subassemblies for P22.00 each. Stufful will eliminate
P25,000 of fixed overhead if it accepts the proposal. Should
Stufful make or buy the subassemblies? What is the difference
between the two alternatives?
Transcribed Image Text:Stufful Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials Direct labor Variable overhead Fixed overhead Total P 1.00 O Make; savings = P60,000 O Buy; savings = P20,000 O Make; savings = $5,000 O Buy; savings = P50,000 10.00 5.00 8.00 P24.00 Burmy Company has contacted Stufful with an offer to sell them 5,000 of the subassemblies for P22.00 each. Stufful will eliminate P25,000 of fixed overhead if it accepts the proposal. Should Stufful make or buy the subassemblies? What is the difference between the two alternatives?
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