(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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fba2d2783-7153-44a9-8ae7-3d5515ebb08b%2F305569d0-e2e7-4f5e-8e45-c6cd2904477f%2Fl7zipu_processed.jpeg&w=3840&q=75)
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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