ABC company manufactures Part No. 1001 for theuse in its tractor assembly operation. Cost per unitfor 5000 units of Part No.1001 is a total of P500 from the following:Direct Labor = P130Direct Material = P110Fixed Factory Overhead = P140Variable Factory Overhead = P120XYZ company offered to sell ABC Co. 5000 units ofPart No. 100i for P510 each. If ABC Co. accepts,some of its facilities presentlyused to manufacture of Part No. 1001 could beused to help with the manufacture of Part No.1001, thus saving P360,000 inrelevant cost in its manufacture of Part No. 1001.Will ABC company decide to make or buy? Howmuch is the savings frombuying instead of making?

Make or buy decision is simply the choice between making the part or the article within the factory…

ABC company manufactures Part No. 1001 for the use in its tractor assembly operation. Cost per unit for 5000 units of Part No. 1001 is a total of P500 from the following: Direct Labor Direct Material = P110 Fixed Factory Overhead = P140 Variable Factory Overhead = P120 XYZ company offered to sell ABC Co. 5000 units of Part No. 10ó1 for P510 each. If ABC Co. accepts, some of its facilities presently used to manufacture of Part No. 1001 could be used to help with the manufacture of Part No. 1001, thus saving P360,000 in relevant cost in its manufacture of Part No. 1001. Will ABC company decide to make or buy? How much is the savings from buying instead of making? P130

ABC company manufactures Part No. 1001 for the use in its tractor assembly operation. Cost per unit for 5000 units of Part No. 1001 is a total of P500 from the following: Direct Labor Direct Material = P110 Fixed Factory Overhead = P140 Variable Factory Overhead = P120 XYZ company offered to sell ABC Co. 5000 units of Part No. 10ó1 for P510 each. If ABC Co. accepts, some of its facilities presently used to manufacture of Part No. 1001 could be used to help with the manufacture of Part No. 1001, thus saving P360,000 in relevant cost in its manufacture of Part No. 1001. Will ABC company decide to make or buy? How much is the savings from buying instead of making? P130

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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