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Dawn Incorporated manufactures Zulueta, a high-end beauty product. The cost per unit for 10,000 units for  Zulueta are as follows: Direct materials, P5; Direct labor, P10; Variable OH, P7; Fixed OH, P10 Richard Company has offered to sell Dawn 10,000 units of Zulueta for P30 per unit. If Dawn accepts  Richard's offer, the released facilities could be used to save P45,000 in relevant costs in the manufacture  another product. In addition, P7 per unit of fixed overhead applied

Dawn Incorporated manufactures Zulueta, a high-end beauty product. The cost per unit for 10,000 units for  Zulueta are as follows: Direct materials, P5; Direct labor, P10; Variable OH, P7; Fixed OH, P10 Richard Company has offered to sell Dawn 10,000 units of Zulueta for P30 per unit. If Dawn accepts  Richard's offer, the released facilities could be used to save P45,000 in relevant costs in the manufacture  another product. In addition, P7 per unit of fixed overhead applied

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Dawn Incorporated manufactures Zulueta, a high-end beauty product. The cost per unit for 10,000 units for 
Zulueta are as follows:
Direct materials, P5; Direct labor, P10; Variable OH, P7; Fixed OH, P10
Richard Company has offered to sell Dawn 10,000 units of Zulueta for P30 per unit. If Dawn accepts 
Richard's offer, the released facilities could be used to save P45,000 in relevant costs in the manufacture 
another product. In addition, P7 per unit of fixed overhead applied to Zulueta would be totally eliminated. 
What alternative is more desirable and by whata amount is it more desirable?
a. Manufacture, P10,000
b. Manufacture, P15,000
c. Buy, P35,000
d. Buy, P65,000

 

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