Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Perez Chemical Company makes a varlety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Perez produces

image text in transcribedimage text in transcribedimage text in transcribed

Perez Chemical Company makes a varlety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Perez produces a relatively small amount (18,000 units) of the cream and Is considering the purchase of the product from an outside supplier for $5.20 each. If Perez purchases from the outside supplier, It would continue to sell and distribute the cream under its own brand name. Perez's accountant constructed the following profitability analysis: Required a. Identify the cost items relevant to the make-or-outsource decision. b. What is the avoidable cost per unit if the outsourcing decision is taken? Should Perez continue to make the product or buy it from the supplier? c. Suppose that Perez is able to Increase sales by 8,000 units (sales will Increase to 26,000 units). Calculate the total avoldable costs. At this level of production, should Perez make or buy the cream? Complete this question by entering your answers in the tabs below. Identify the cost items relevant to the make-or-outsource decision. Complete this question by entering your answers in the tabs below. What is the avoidable cost per unit if the outsourcing decision is taken? Should Perez continue to make the product or buy it from the supplier? Note: Round your answer to 2 decimal places. Complete this question by entering your answers in the tabs below. Suppose that Perez is able to increase sales by 8,000 units (sales will increase to 26,000 units). Calculate the total avoidable costs. At this level of production, should Perez make or buy the cream

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Franchising An Accounting Auditing And Income Tax Guide

Authors: Ross A. McCallum

2011edition

1460906179, 978-1460906170

More Books

Students also viewed these Accounting questions

Question

7. What are some basic guidelines for designing web pages? (LO 6-6)

Answered: 1 week ago