Pamela Company makes steel blades for lawn mowers that it heat treats, assembles and sells. The cost accounting system gives the following data Prime costs Variable manufacturing overhead Fixed manufacturing overhead Units produced P80,000 60,000 90,000 100,000 units Pamela has an opportunity to purchase its 100,000 blades from an outside supplier at a cost of P2.20 per blade. Inspection of the purchased blades will cost an additional P5,000 in the Quality Assurance Dept. Certain leased equipment, which costs P30,000 and is included in fixed overhead can be avoided if the blades are purchased. The leased space could be used to make a part that is now purchased, which would save Pamela P46,000 Should Pamela buy the blades from outside supplier?
Pamela Company makes steel blades for lawn mowers that it heat treats, assembles and sells. The cost accounting system gives the following data Prime costs Variable manufacturing overhead Fixed manufacturing overhead Units produced P80,000 60,000 90,000 100,000 units Pamela has an opportunity to purchase its 100,000 blades from an outside supplier at a cost of P2.20 per blade. Inspection of the purchased blades will cost an additional P5,000 in the Quality Assurance Dept. Certain leased equipment, which costs P30,000 and is included in fixed overhead can be avoided if the blades are purchased. The leased space could be used to make a part that is now purchased, which would save Pamela P46,000 Should Pamela buy the blades from outside supplier?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pamela Company makes steel blades for lawn mowers that it heat treats, assembles and sells. The cost
accounting system gives the following data
P80,000
60,000
90,000
100,000 units
Prime costs
Variable manufacturing overhead
Fixed manufacturing overhead
Units produced
Pamela has an opportunity to purchase its 100,000 blades from an outside supplier at a cost of P2.20
per blade. Inspection of the purchased blades will cost an additional P5,000 in the Quality Assurance
Dept. Certain leased equipment, which costs P30,000 and is included in fixed overhead can be avoided if
the blades are purchased. The leased space could be used to make a part that is now purchased, which
would save Pamela P46,000
Should Pamela buy the blades from outside supplier?
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