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b) Fine Silverware Company Limited makes and sells varying utensils to several hotel chains and restaurants across the island. One of its divisions produces
b) Fine Silverware Company Limited makes and sells varying utensils to several hotel chains and restaurants across the island. One of its divisions produces spoons and in recent times the company's accountant prepared the following cost statement of the annual production expenses associated with the division: Variable Production Expenses: $ Materials Costs (30,000 x $50.00) 1,500,000 Labour Costs (30,000 x $100.00) 3,000,000 Variable Manufacturing Overhead (30,000 x $30.00) 900,000 Fixed Production Expenses: Salary of Production Supervisor Depreciation of Production Equipment Total Costs 2,500,000 200,000 8,100,000 One of Fine Silverware's competitor currently has 30,000 of the same spoons (with similar quality) among its inventory and is willing to sell them for $275.00 each. Fine Silverware Company Limited would have to pay the shipping expenses from it's competitors plant to its plant, at a rate of $0.20 per spoon. Also, one third of all fixed production expenses continue regardless of the decision made. Required: Should Fine Silverware Company Limited make or buy spoons? Explain why or why not. marks) (10
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