QUESTION 5 Cosi Ltd. manufactures a variety of engines for use in heavy equipment. The company has always produced all the necessary parts for its engines, including all of the carburettors. An outside supplier has offered to produce and sell one type of carburettor to Cosi Ltd., for a cost of £35.00 per unit. To evaluate this offer, the company has gathered the following information relating to its own cost of producing the carburettor internally: Per Unit 15,000 units per year Direct material £14.00 £210,000 Direct labour £10.00 £150,000 Variable manufacturing overhead £3.00 £45,000 Fixed manufacturing overhead, traceable £6.00" £90,000 Fixed manufacturing overhead. Allocated £9.00 £135,000 Total cost £42.00 £630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).

QUESTION 5 Cosi Ltd. manufactures a variety of engines for use in heavy equipment. The company has always produced all the necessary parts for its engines, including all of the carburettors. An outside supplier has offered to produce and sell one type of carburettor to Cosi Ltd., for a cost of £35.00 per unit. To evaluate this offer, the company has gathered the following information relating to its own cost of producing the carburettor internally: Per Unit 15,000 units per year Direct material £14.00 £210,000 Direct labour £10.00 £150,000 Variable manufacturing overhead £3.00 £45,000 Fixed manufacturing overhead, traceable £6.00" £90,000 Fixed manufacturing overhead. Allocated £9.00 £135,000 Total cost £42.00 £630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).

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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