Azure Ltd produces confectionery and is considering extending their product range to include biscuits, crackers and crisps. They could either buy in products made to their specification or manufacture the products in-house. If they manufacture them they would have to buy additional equipment for each product range. All manufactured products would be charged with 12% of sales revenue to cover the overheads of the business. Use the data in the table below to assess whether each product range should be bought in or manufactured in-house: Biscuits 1,100,000 1,500,000 Crisps 2,100,000 Crackers Sales demand per annum (in number of units) Sales price per 100 units Equipment cost Bought-in price per 100 units Raw materials per 100 units Variable labour costs per 100 units Distribution cost per 100 units Allocation of overhead – 12% of sales (per 100 units) £155 £220 £90 £260,000 £375,000 £130,000 £98 £170 £68 £32 £60 £25 £25 £60 £15 £15 £30 £11.75 £18.60 £26.40 £10.80
Azure Ltd produces confectionery and is considering extending their product range to include biscuits, crackers and crisps. They could either buy in products made to their specification or manufacture the products in-house. If they manufacture them they would have to buy additional equipment for each product range. All manufactured products would be charged with 12% of sales revenue to cover the overheads of the business. Use the data in the table below to assess whether each product range should be bought in or manufactured in-house: Biscuits 1,100,000 1,500,000 Crisps 2,100,000 Crackers Sales demand per annum (in number of units) Sales price per 100 units Equipment cost Bought-in price per 100 units Raw materials per 100 units Variable labour costs per 100 units Distribution cost per 100 units Allocation of overhead – 12% of sales (per 100 units) £155 £220 £90 £260,000 £375,000 £130,000 £98 £170 £68 £32 £60 £25 £25 £60 £15 £15 £30 £11.75 £18.60 £26.40 £10.80
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
Transcribed Image Text:Azure Ltd produces confectionery and is considering extending their product range to include
biscuits, crackers and crisps. They could either buy in products made to their specification or
manufacture the products in-house. If they manufacture them they would have to buy additional
equipment for each product range. All manufactured products would be charged with 12% of sales
revenue to cover the overheads of the business.
Use the data in the table below to assess whether each product range should be bought in or
manufactured in-house:
Crackers
1,100,000 1,500,000
Crisps
2,100,000
Biscuits
Sales demand per annum (in number of units)
Sales price per 100 units
Equipment cost
Bought-in price per 100 units
£155
£220
£90
£260,000
£375,000
£130,000
£98
£170
£68
£32
Raw materials per 100 units
Variable labour costs per 100 units
Distribution cost per 100 units
Allocation of overhead – 12% of sales (per 100 units)
£60
£25
£25
£60
£15
£15
£30
£11.75
£18.60
£26.40
£10.80
Expert Solution
Step 1 Introduction
Make or Buying decision: If you create or buy a product, you decide whether to manufacture it in-house or purchase it from an outside provider. Decisions on whether to make or purchase anything, like outsourcing decisions, need an analysis of costs and benefits of creating something vs buying it from somewhere else.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education