Question
PT, ASTRA INC. Always making its own components, however, PT, INDOMORA has recently offered to supply one C-430 component, priced at $11 per unit. Astra
PT, ASTRA INC. Always making its own components, however, PT, INDOMORA has recently offered to supply one C-430 component, priced at $11 per unit. Astra uses 5,300 units of these components annually. The absorption cost per unit of this component is: Direct raw materials $5.00 Direct labor $2.38 Variable overhead $1.90 Fixed overhead $3.00 Total $12.28 Fixed overhead is a fixed expense, none of which will be written off if production of C-430 components is stopped. Requested: 1.Is PT. Astra still produce itself or have to buy from outside? Explain with calculations. 2. If you buy from outside the fixed costs can be removed by 60%, whether you continue to produce yourself or buy from outside.
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