Question
BASF produces 20,000 chemical barrels annually. The cost breakdown per barrel is as follows: Cost Type Cost per Barrel Direct materials 25 Direct labor 15
BASF produces 20,000 chemical barrels annually. The cost breakdown per barrel is as follows:
| Cost Type | Cost per Barrel |
|---|---|
| Direct materials | €25 |
| Direct labor | €15 |
| Variable manufacturing overhead | €10 |
| Fixed manufacturing overhead | €10 |
| Total | €60 |
BASF has received an offer from Evonik to supply 20,000 barrels at €55 each. Accepting the offer would reduce fixed overhead by €30,000.
- Conduct a differential analysis to determine if BASF should make or buy the barrels.
- Determine the total cost change if the offer is accepted.
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Accounting Information Systems
Authors: Marshall B. Romney, Paul J. Steinbart
12th edition
132552620, 978-0132552622
