Quarantine Company manufactures Part AA for use in its production cycle. The costs per unit fo 25,000 units for the part are as follows: Direct materials P 7.50 Direct labor 37.50 Variable overhead 15.00 Fixed overhead 20.00 Lockdown Company has offered to sell Quarantine the 25,000 units needed by the latter for P75 per unit. If Quarantine accepts the offer, the released facilities could be used to save relevant costs amounting to P112,500 in the manufacture of another part. In addition, P12.50 per unit o fixed overhead applied to part AA would totally eliminated. What alternative is more desirable and by what amount it is more desirable?

Quarantine Company manufactures Part AA for use in its production cycle. The costs per unit fo 25,000 units for the part are as follows: Direct materials P 7.50 Direct labor 37.50 Variable overhead 15.00 Fixed overhead 20.00 Lockdown Company has offered to sell Quarantine the 25,000 units needed by the latter for P75 per unit. If Quarantine accepts the offer, the released facilities could be used to save relevant costs amounting to P112,500 in the manufacture of another part. In addition, P12.50 per unit o fixed overhead applied to part AA would totally eliminated. What alternative is more desirable and by what amount it is more desirable?

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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None
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