12. Picnic Items, Inc. manufactures coolers of 10,000 units that contain a freezable ice bag. For an annual volume of 10,000 units, fixed manufacturing costs of P500,000 are incurred. Variable costs per unit amount are direct materials - P80; direct labor - P15, and variable factory overhead - P20 Bags Corp. offered to supply the assembled ice bag for P40 with a minimum order of 5,000 units. If Picnic accepts the offer, it will be able to reduce variable labor and overhead by 5096. The direct materials for the freezable bag will cost Picnic P20 if it will produce it. Considering Bags Corp. offer, Picnic should a. Buy the freezable ice bag due to P150,000 advantage. b. Produce the freezable ice bag due to P25,000 advantage. c. Produce the freezable ice bag due to P50,000 advantage. d. Buy the freezable bag due to P50,000 advantage.
12. Picnic Items, Inc. manufactures coolers of 10,000 units that contain a freezable ice bag. For an annual volume of 10,000 units, fixed manufacturing costs of P500,000 are incurred. Variable costs per unit amount are direct materials - P80; direct labor - P15, and variable factory overhead - P20 Bags Corp. offered to supply the assembled ice bag for P40 with a minimum order of 5,000 units. If Picnic accepts the offer, it will be able to reduce variable labor and overhead by 5096. The direct materials for the freezable bag will cost Picnic P20 if it will produce it. Considering Bags Corp. offer, Picnic should a. Buy the freezable ice bag due to P150,000 advantage. b. Produce the freezable ice bag due to P25,000 advantage. c. Produce the freezable ice bag due to P50,000 advantage. d. Buy the freezable bag due to P50,000 advantage.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:12. Picnic Items, Inc. manufactures coolers of 10,000 units that contain a freezable ice bag. For
an annual volume of 10,000 units, fixed manufacturing costs of P500,000 are incurred. Variable
costs per unit amount are direct materials - P80; direct labor - P15, and variable factory overhead
- P20
Bags Corp. offered to supply the assembled ice bag for P40 with a minimum order of 5,000 units.
If Picnic accepts the offer, it will be able to reduce variable labor and overhead by 5096. The direct
materials for the freezable bag will cost Picnic P20 if it will produce it. Considering Bags Corp.
offer, Picnic should
a. Buy the freezable ice bag due to P150,000 advantage.
b. Produce the freezable ice bag due to P25,000 advantage.
c. Produce the freezable ice bag due to P50,000 advantage.
d. Buy the freezable bag due to P50,000 advantage.
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