NUBD Co. manufactures Part 123 for use in its production cycle. The cost per unit for 20,000 units of Part 123 are as follows: Direct materials Direct labor P6 P30 Variable overhead P12 P16 Fixed overhead applied BDX Co. has offered to sell 20,000 units of Part 123 to NUBD Co. for P60 per unit. NUBD Co. will make the decision to buy the part from BDX Co. if there is a savings of P25,000 for NUBD Co. If NUBD Co. accepts BDX's offer, P9 per unit of the fixed overhead applied would totally be eliminated. Furthermore, NÚBD Co. has determined that the released facilities could be used to save relevant costs in the manufacture of Part 456.
NUBD Co. manufactures Part 123 for use in its production cycle. The cost per unit for 20,000 units of Part 123 are as follows: Direct materials Direct labor P6 P30 Variable overhead P12 P16 Fixed overhead applied BDX Co. has offered to sell 20,000 units of Part 123 to NUBD Co. for P60 per unit. NUBD Co. will make the decision to buy the part from BDX Co. if there is a savings of P25,000 for NUBD Co. If NUBD Co. accepts BDX's offer, P9 per unit of the fixed overhead applied would totally be eliminated. Furthermore, NÚBD Co. has determined that the released facilities could be used to save relevant costs in the manufacture of Part 456.
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 6PA: Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin...
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In order to have a savings of P25,000, the amount of relevant costs that would be saved by using the released facilities in the manufacture of Part 456 would have to be
Transcribed Image Text:NUBD Co. manufactures Part 123 for use in its production cycle. The cost per unit for
20,000 units of Part 123 are as follows:
Direct materials
Direct labor
P6
P30
Variable overhead
P12
P16
Fixed overhead applied
BDX Co. has offered to sell 20,000 units of Part 123 to NUBD Co. for P60 per unit.
NUBD Co. will make the decision to buy the part from BDX Co. if there is a savings of
P25,000 for NUBD Co. If NUBD Co. accepts BDX's offer, P9 per unit of the fixed
overhead applied would totally be eliminated. Furthermore, NUBD Co. has
determined that the released facilities could be used to save relevant costs in the
manufacture of Part 456.
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