Buddy Pets has recently started to manufacture talking toy pets. The cost structure to manufacture 13,700 of these toy pets is as follows: Direct materials ($32 per pet) $438,400 Direct labour ($26 per pet) 356,200 Variable overhead ($13 per pet) 178,100 Allocated fixed overhead ($24 per pet) 328,800 Total $1,301,500 Buddy Pets is approached by Maxum Inc., which offers to make the toy pets for $84 per unit. Using incremental analysis, determine whether Buddy Pets should accept this offer under each of the following independent assumptions: Please dont provide solutions image based thanx
Buddy Pets has recently started to manufacture talking toy pets. The cost structure to manufacture 13,700 of these toy pets is as follows: Direct materials ($32 per pet) $438,400 Direct labour ($26 per pet) 356,200 Variable overhead ($13 per pet) 178,100 Allocated fixed overhead ($24 per pet) 328,800 Total $1,301,500 Buddy Pets is approached by Maxum Inc., which offers to make the toy pets for $84 per unit. Using incremental analysis, determine whether Buddy Pets should accept this offer under each of the following independent assumptions: Please dont provide solutions image based thanx
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Buddy Pets has recently started to manufacture talking toy pets.
The cost structure to manufacture 13,700 of these toy pets is as follows:
| Direct materials ($32 per pet) | $438,400 | ||
| Direct labour ($26 per pet) | 356,200 | ||
| Variable |
178,100 | ||
| Allocated fixed overhead ($24 per pet) | 328,800 | ||
| Total | $1,301,500 |
Buddy Pets is approached by Maxum Inc., which offers to make the toy pets for $84 per unit.
Using incremental analysis, determine whether Buddy Pets should accept this offer under each of the following independent assumptions:
Please dont provide solutions image based thanx
Transcribed Image Text:Prepare an incremental analysis. Assume that $164,400 of the fixed overhead cost (in making 13,700 of the toy pets) is
avoidable. (Enter savings with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).)
Cost
Total annual cost
+A
$
Make
tA
Buy
Cost (Saving)
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