PAX Corporation uses Part BLX in the assembly of a major product line . The cost to produce one BLX is presented below :

Direct materials P 4,000

Material handling (20% of direct materials) 800

Direct labor 32,000

Overhead 48,000

Total manufacturing costs P 84,800

Material handling which are not included in

manufacturing overhead represents the direct variable costs of the receiving department that are applied to direct materials and purchased component on the basis of their costs. The companys annual overhead budget is one-third variable and two-third fixed. Ten units of BLX are expected to be acquired for one month. ZIM Co. offers to supply BLX at a unit price of P 60,000. Pax, if it chooses to buy BLX can use the idle capacity to produce CZX that could contribute P208,000 a month .

If Pax chooses to manufacture BLX to assure quality control, its opportunity costs is a. P208,000 b.P302,000 c. P512,000 d. P16,000 SHOW SOLUTION