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(1) Should Elephant Ears Co. make or buy each of the components it sells? (ii) If the components are all made by Elephant Ears Co. how much profit will be made? (ii) If your recommendation in part (1) is taken up how much profit will be made?

(1) Should Elephant Ears Co. make or buy each of the components it sells? (ii) If the components are all made by Elephant Ears Co. how much profit will be made? (ii) If your recommendation in part (1) is taken up how much profit will be made?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Elephan Co. produces 3 components with the following information available

C Production (units) 20,000 40,000 80,000 Direct Material Cost Per unit 0.80 1.00 0.40 Direct Labor Cost Per unit 1.60 1.80 0.80 Direct Overhead Cost Per unit 0.40 0.60 0.20 Fixed cost per unit 0.80 1.00 0.40 Sales Price per unit 4.00 5.00 2.00 Imported Price 2.75 4.20 2.00 Required: (1) Should Elephant Ears Co. make or buy each of the components it sells? (i) If the components are all made by Elephant Ears Co. how much profit will be made? (ii) If your recommendation in part (i) is taken up how much profit will be made? (iv) What other factors should be considered before this decision is made?
Transcribed Image Text:C Production (units) 20,000 40,000 80,000 Direct Material Cost Per unit 0.80 1.00 0.40 Direct Labor Cost Per unit 1.60 1.80 0.80 Direct Overhead Cost Per unit 0.40 0.60 0.20 Fixed cost per unit 0.80 1.00 0.40 Sales Price per unit 4.00 5.00 2.00 Imported Price 2.75 4.20 2.00 Required: (1) Should Elephant Ears Co. make or buy each of the components it sells? (i) If the components are all made by Elephant Ears Co. how much profit will be made? (ii) If your recommendation in part (i) is taken up how much profit will be made? (iv) What other factors should be considered before this decision is made?
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