Stripe Company has been purchasing a component, Part Q, for P19.20 per unit. Stripe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows:Direct materialsP11.50Direct labor4.50Variable factory overhead1.12Fixed factory overhead 3.15TotalP20.27 Should the company make or buy the component? Prepare a differential analysis report dated March 12 of the current year to support your answer.

Make or Buy decision: The analysis of difference in manufacturing cost or to purchase the product is…

Answered: Stripe Company has been purchasing a…

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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Stripe Company has been purchasing a component, Part Q, for P19.20 per unit. Stripe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows:

Direct materials	P11.50
Direct labor	4.50
Variable factory overhead	1.12
Fixed factory overhead	3.15
Total	P20.27

Should the company make or buy the component? Prepare a differential analysis report dated March 12 of the current year to support your answer.

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