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Luboh Pty Ltd has been manufacturing a housings which is a shell box for its gaming computer parts to fit in. The unit costs of
Luboh Pty Ltd has been manufacturing a housings which is a shell box for its gaming computer parts to fit in. The unit costs of the box alone are as follows: Direct materials $ 5.00 Direct labour $ 24.00 Variable overhead $ 16.00 Fixed overhead $ 22.00 $ 67.00 Techo Pty Ltd has contacted Luboh with an offer to sell it 5,000 housing box for $50.00 each. Required a. Should Luboh make or buy the housing box based purely on financial considerations? Show full calculations. b. The accountant decided to investigate the fixed costs to see whether any incremental changes would occur if the housing boxes were no longer manufactured. The accountant believes that Luboh Pty Ltd will eliminate $50,000 of fixed overhead if it accepts the proposal. Does this new information change the decision? Show your calculations. What qualitative factors are important for Luboh to make or buy decision? C
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