Question

Sınav gezinti Soru 15 2 Henüz cevaplanmadı XYZ Company has offered to sell 5000 units of product for $27 each to Company B. If Company B accepts the offer, some of the facilities presently used to manufacture this product could be used to help with the manufacture of another product, thus saving $15.000 of the fixed factory overhead applied to the earlier product Costs per unit for 5000 units are: 7 13 5.00 üzerinden işaretlenmis Direct material: $4 Uygulamayib Soruyu işaretle Direct labour.12 Fixed factory overhead: $35.000 Which of the following statements is correct regarding the Company B consideration of making or buying? Lütfen birini seçin a. Company B should not accept the offer because total cost of production per unit is higher than $27 Company should nccept the offer because they don't have to spend time for production апуттiore c Company B should accept the offer because they can elimitate $15.000 of fixed cost d. Company should help the one the total costat aduction is less than total cost of purchase

Answer 1

Total cost of production

Direct material = 5,000*4 = 20,000

Direct labour = 5,000*12 = 60,000

Fixed cost = 35,000

= $115,000

Total cost of purchasing

= 5,000*27

= $135,000

The capacity will be used in production of other product saving $15,000 of fixed cost, thus reducing the purchase cost by $15,000. But if the product is purchased remaining fixed cost of $20,000 will be still be incurred as it is fixed in nature.

Therefore purchasing cost will

= 135,000 - 15,000 + 20,000

= $140,000

As the Total cost of purchasing is Higher as compared to total cost of production therefore the company should not accept the offer.

So the correct option is D

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