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John Corporation manufactures laser printers. John currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums follows: Cost per drum Total Cost P 23 P 736,000 Variable Manufacturing Costs Fixed manufacturing Costs 65 2,080,000 Total Costs P80 P 2,816,000 Hardware Solutions, Inc. has offered to provide John with all of its imaging drum needs for P73 per drum. If Jay accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, John will be able to use the freed up space to generate P240,000 of income each year in the production of alternative products. Based on the information presented, the price that John would be indifferent on whether to make or buy the drums from Hardware would be P per unit

John Corporation manufactures laser printers. John currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums follows: Cost per drum Total Cost P 23 P 736,000 Variable Manufacturing Costs Fixed manufacturing Costs 65 2,080,000 Total Costs P80 P 2,816,000 Hardware Solutions, Inc. has offered to provide John with all of its imaging drum needs for P73 per drum. If Jay accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, John will be able to use the freed up space to generate P240,000 of income each year in the production of alternative products. Based on the information presented, the price that John would be indifferent on whether to make or buy the drums from Hardware would be P per unit

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7EB: Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has...
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John Corporation manufactures laser printers. John currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums follows: Cost per drum Total Cost P 23 P 736,000 Variable Manufacturing Costs Fixed manufacturing Costs 65 2,080,000 Total Costs P80 P 2,816,000 Hardware Solutions, Inc. has offered to provide John with all of its imaging drum needs for P73 per drum. If Jay accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, John will be able to use the freed up space to generate P240,000 of income each year in the production of alternative products. Based on the information presented, the price that John would be indifferent on whether to make or buy the drums from Hardware would be P per unit
Transcribed Image Text:John Corporation manufactures laser printers. John currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums follows: Cost per drum Total Cost P 23 P 736,000 Variable Manufacturing Costs Fixed manufacturing Costs 65 2,080,000 Total Costs P80 P 2,816,000 Hardware Solutions, Inc. has offered to provide John with all of its imaging drum needs for P73 per drum. If Jay accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, John will be able to use the freed up space to generate P240,000 of income each year in the production of alternative products. Based on the information presented, the price that John would be indifferent on whether to make or buy the drums from Hardware would be P per unit
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