18. Quarantine Company manufactures Part AA for use in its production cycle. The costs per unit for 25,000 units for the part are as follows: Direct materials P 7.50 Direct labor Variable overhead Fixed overhead 37.50 15.00 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 of fixed overhead applied to part AA would totally eliminated. What alternative is more desirable and by what amount it is more desirable? 19. Beat Company manufactures 8,000 units of a certain component per year. This component is used in the production of the main product. The following are the costs to make the component per unit: Direct materials P 4 Direct labor 4 Variable overhead 3 5 Fixed overhead If Beat Company buys the component from an outside supplier, the company can rent out the released facilities for P12,360 a year. The cost of the component per unit as quoted by the supplier is P15. 25% of fixed overhead applied in the manufacture of the component will continue regardless of what decision is made. For all purchase made by the company, freight and handling costs are applied at 2% of the purchase price. The direct materials cost presented above is exclusive of such freight and handling cost. What is the advantage or disadvantage of buying the component? 20. 20 Hooray Company has been manufacturing 12,000 units of Part A which is used to manufacture one of its products. At this level of production, the cost per unit is as follows: Direct materials P 4.80 Direct labor Variable overhead Fixed overhead 19.20 9.60 14.40 Hooray Company has an opportunity to purchase the parts from Supplier Silver Company at P45.60 per unit. It determined that it could use the facilities presently used to manufacture Part A and generate an operating profit of P9,600. It also determined that 40% of the fixed overhead applied will continue even if Part A is purchased from Supplier Silver If the Company decides to purchase from an outside supplier, what will be the gain or loss?