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cima-p1

CIMA P1 Chapter 12 Test

CIMA Free Mock Exam

1 Comment

  1. MikeLittleTutor
    The external price is compared, not with the total unit cost of Alpha, Beta and Gamma but with the variable cost per unit

    The manufacturer is still faced with paying the fixed cost

    Buying in the components will cost the manufacturer the cost per unit + the associated fixed costs per unit

    For Alpha, that's a total of $8 + $6 = $14 whereas the component can be produced internally for $12

    For Beta, it's $18 + $12, a total of $30 and that compares with an internal cost of $32

    For Gamma, the equivalent figures are $19 + $4, a total of $23 and that compares with the existing unit cost of production of $20

    So the manufacturer should consider buying in only the component Beta

    OK?

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