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hello can you please help with this question.
A company produces a certain component needed for its major product. The company’s management accounting depart reports the following costs of producing the component internally. 8,000 UNITS IN $
Direct materials 6,000 48,000,000
Direct labor 4,000 32,000,000
Variable overhead 1,000 8,000,000
Supervisors Salary 3,000 24,000,000
Depreciation of special equipment 2,000 16,000,000
Allocated general overhead 5,000 40,000,000
TOTAL COST 21,000 168,000,000
A company received an offer from outside supplier for the component at $19,000 each for all the 8000 units of components needed.
1. Advise the company on the decision to make.
2. Assuming by deciding to buy the component from an outside supplier, the company would free up production space which would be utilized to produce more products to generate $60,000,000 per annum, What would be the company’s new decision?Hi – As mentioned in previous post ( and in reply to you on our ACCA FMA boards) – Im afraid we can not simply answer lengthy questions in this way.
You presumably have a model answer in the textbook that this has been taken from – so you need to share it and explain which part you dont understand & need us to clarify.
Please also watch our lectures on relevant costing – this type of decision is covered in detail
Thank you
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