It costs P450,000 to make 150,000 units of a part in the plant. This cost includes material of P90,000 direct labor of P120,000, variable overhead of P15,000 and P225,000 in fixed overhead inclusive of P45,000 in depreciation and common overhead allocation of P150,000. The balance is for the section supervisor’s salary. The part can be purchased for P20 per unit. If the part is purchased, the space released can be rented for P65,000. If the part is purchased, the company’s profit will

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A:

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A: SOLUTION-1 MAKE OR BUY DECISION

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