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Pleasanton Company manufactures and sells 10,000 telephones per year for $540 each. The full manufacturing costs per telephone are as follows: 3. Direct materials Direct
Pleasanton Company manufactures and sells 10,000 telephones per year for $540 each. The full manufacturing costs per telephone are as follows: 3. Direct materials Direct labor Variable manufacturing overhead Average fixed manufacturing overhead Total 16 10 S41 The Telecom America has offered to sell Pleasanton 10,000 telephones for $32 per unit. If Pleasanton Company accepts the offer, $25,000 of fixed overhead will be eliminated a. Prepare a differential analysis of the relevant costs and revenues associated with the decision to make or buy the phones. b. Should Pleasanton Company make or buy the phones? What other factors should they consider in this decision? 4. Elm Paper Corporation manufactures 20,000 rolls of paper each period. The paper is used as an input for producing several other products that Elm manufactures. The full manufacturing costs for a batch of 100 rolls of paper are as follows: Direct materials Direct labor Variable manufacturing overhead Average fixed manufacturing overhead Total $270 200 200 37 5 The fixed manufacturing overhead is comprised of depreciation expenses related to prion investments in facilities and equipment that are used in the manufacturing of the paper. These assets have no other use than for the manufacturing of the paper. An outside supplier has offered to sell Elm the 20,000 rolls of paper necessary to meet production needs this period for a lump-sum of $145,000 What should Elm do if it wants to maximize its profit for the period
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