NUBD's shop can make 1,000 units of a necessary component with the following costs: Direct materials Direct labor Variable overhead Fixed overhead P64,000 P16,000 P8,000 The company can purchase the 1,000 units externally for P104,000. The unavoidable DE O00 if the oue t bet ot
NUBD's shop can make 1,000 units of a necessary component with the following costs: Direct materials Direct labor Variable overhead Fixed overhead P64,000 P16,000 P8,000 The company can purchase the 1,000 units externally for P104,000. The unavoidable DE O00 if the oue t bet ot
NUBD's shop can make 1,000 units of a necessary component with the following costs: Direct materials Direct labor Variable overhead Fixed overhead P64,000 P16,000 P8,000 The company can purchase the 1,000 units externally for P104,000. The unavoidable DE O00 if the oue t bet ot
What are the fixed overhead costs of making the component?
Transcribed Image Text:NUBD's shop can make 1,000 units of a necessary component with the following
costs:
Direct materials
Direct labor
Variable overhead
Fixed overhead
P64,000
P16,000
P8,000
The company can purchase the 1,000 units externally for P104,000. The unavoidable
fixed costs are P5,000 if the units are purchased externally. An analysis shows that at
this external price, the company is indifferent between making or buying the part.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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