Knox Company uses 10,000 units of a part in its production process. The costs to make a part are: direct material, P12; direct labor, P25; variable overhead, P13; and applied fixed overhead, P30. Knox has received a quote of P55 from a potential supplier for this part. If Knox buys the part, 70 percent of the applied fixed overhead would continue. 13) Knox Company would be better off by a. P50,000 to manufacture the part. b. P150,000 to buy the part. C. P40,000 to buy the part. d. P160,000 to manufacture the part.

Knox Company uses 10,000 units of a part in its production process. The costs to make a part are: direct material, P12; direct labor, P25; variable overhead, P13; and applied fixed overhead, P30. Knox has received a quote of P55 from a potential supplier for this part. If Knox buys the part, 70 percent of the applied fixed overhead would continue. 13) Knox Company would be better off by a. P50,000 to manufacture the part. b. P150,000 to buy the part. C. P40,000 to buy the part. d. P160,000 to manufacture the part.

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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Jordan electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly costs of producing 9,100 containers follow Unit-level material $6,000 Unit-level labor $6,700 unit-level overhead $3,300 product-level costs* $11,700 Allocated facility-level costs $26,500 *one-third of these costs can be avoided by purchasing the containers. Russo container company has offered to sell comparable containers to Jordan for $2.80 each. Required a) Calculate the total relevant cost should Jordan continue to make the containers. b) Jordan could lease the space it currently uses in the manufacturing process if leasing would produce $11,700 per month, and calculate the total avoidable costs. Should Jordan continue to make the containers? a) Total relevant cost should Jordan continue to make the containers? Total avoidable cost Should Jordan continue to make the containers?
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