Listed below are a company’s monthly unit costs to manufacture and market a particular product. Unit Costs Variable Cost Fixed Costs Direct materials P2.00 Direct labor 2.40 Indirect Manufacturing 1.60 P1.00 Marketing 2.50 1.50 The company must decide to continue making the product or buy it from an outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 30% if the company were to accept the proposal. What is the maximum amount per unit that the company can pay the supplier without decreasing its operating income? • P5.25 • P7.75 • P6.75 • P8.50 • None of the above
Listed below are a company’s monthly unit costs to manufacture and market a particular product.
Unit Costs Variable Cost Fixed Costs
Direct materials P2.00
Direct labor 2.40
Indirect Manufacturing 1.60 P1.00
Marketing 2.50 1.50
The company must decide to continue making the product or buy it from an outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 30% if the company were to accept the proposal. What is the maximum amount per unit that the company can pay the supplier without decreasing its operating income?
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