[bafiemo]

I agree: it is a poor question.

But it is clearer to me now, I think. Your kindness is much appreciated, good Sir, thank you very much.

[bafiemo]

Are such assumptions healthy?

[bafiemo]

Big Phones makes smart phones. The company sells 1 million phones each year. Each phone includes a standard rechargeable battery. Currently, the batteries are manufactured in-house, but the company has recently received an offer from Super Batteries to supply all the batteries required for a price of $2 each.

The management accountant has prepared a schedule showing the total costs of producing 1 million batteries last year as follows:

$000
Materials 1400
Direct Labour 320
Machine Running costs 240
Depreciation 250
Other Overheads 400
Total 2610

Depreciation includes depreciation of the factory building which is apportioned to each product. $75000 has been apportioned to the battery manufacturing department. If the manufacture of batteries were to be outsourced, this part of the factory would remain empty, at least in the short term.

Other overheads include a $300000 apportionment of general factory overheads that are not specific to making batteries

Required:
Determine the costs that would be saved if the offer is accepted and hence advise Big Phones whether it should continue to manufacture the batteries in-house or outsource their manufacture to Super Batteries.

Solution.
$000
Materials 1400
Direct Labour 320
Machine Running costs 240
Depreciation* 175
Other Overheads* 100
Total 2235

[bafiemo]

Hello has anybody written topic 18 – Marketing strategy and its effectiveness, I could use some help with my layout

[Author]

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