Assume that Thompson Manufacturing Company (TMC) incurs the following costs in producingelectronic components every month:Direct materialsP5.00/unit3.00/unitDirect laborVariable factory overheadFixed factory overhead2.00/unit30,000Assume further that TMC found a producer of the same electronic components and isentertaining the idea of buying 5,000 units per month for one year instead of processing all thecomponents. If this plan pushes through, the buying price per unit will be P2.20. This plan willreduce TMC's material costs by 10% and direct labor & variable factory overhead by 20%.Fixed factory overhead of P20,000 will be eliminated.Required:1. Determine the net effect of buying the components on the net income. Will you outsourcethe components?2. Cite at least two examples of benefits, associated with supply chain management, in theevent that TMC decides to buy the components.

Required: 1. Determine the net effect of buying the components on the net income. Will you outsource the components? 2. Cite at least two examples of benefits, associated with supply chain management, in the event that TMC decides to buy the components.

Required: 1. Determine the net effect of buying the components on the net income. Will you outsource the components? 2. Cite at least two examples of benefits, associated with supply chain management, in the event that TMC decides to buy the components.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 39E

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