Orange is currently buying 50,000 motherboard from MotherBoard, Inc. at a price of P65 per board. Orange is considering making its own boards. The costs to make the board are as follows: Direct Materials P32 per unit, Direct labor P10 per unit, Variable Factory Overhead P16.00, Fixed Costs for the plant would increase by P75,000. Which option should be selected and why?   a. Make - P350,000 increase in profits b. Make - P275,000 increase in profits c. Buy - P75,000 more in profits d. Buy - P275,000 more in profits

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 6MC: Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling...
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Orange is currently buying 50,000 motherboard from MotherBoard, Inc. at a price of P65 per board. Orange is considering making its own boards. The costs to make the board are as follows: Direct Materials P32 per unit, Direct labor P10 per unit, Variable Factory Overhead P16.00, Fixed Costs for the plant would increase by P75,000. Which option should be selected and why?
 
a. Make - P350,000 increase in profits
b. Make - P275,000 increase in profits
c. Buy - P75,000 more in profits
d. Buy - P275,000 more in profits
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