Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. Owly Corporation's agriculture division currently produces their own soil mix to grow the plants they sell in. Owly currently makes 200,000 cubic meters

3. Owly Corporation's agriculture division currently produces their own soil mix to grow the plants they sell in. Owly currently makes 200,000 cubic meters of soil mix a year. Each cubic meter of soil mix has direct labour costs of $1.50, direct material costs of $3.15, variable overhead costs of $0.75, and fixed overhead costs of $0.70 for a total cost of $6.10 per cubic meter. An outside supplier has offered to sell Owly soil mix for $5.75 per cubic meter. If Owly purchases the soil mix, 25% of the fixed manufacturing overhead will be eliminated, the remaining 75% will still exist. A. What is the net dollar advantage (disadvantage) of purchasing the soil mix rather than making it? B. What is the maximum amount Owly is willing to pay an outside supplier per cubic meter (to the cent) for the soil mix if the supplier commits to supplying all 200,000 cubic meters? C. After one month of greenhouse growing time Owly can produce 100,000 four inch pot basil plants that can be sold for $2.20 each. Another month in the greenhouse results in 80,000 ten inch pot basil plants that can be sold for $4.80 each. A month of greenhouse growing time costs Owly $135,000. What is the dollar advantage (disadvantage) of growing the plants for another month?

Step by Step Solution

3.29 Rating (146 Votes )

There are 3 Steps involved in it

Step: 1

For a better understanding lets summarize the details provided on the requirement Given that 1 Cost of self produced soil 610 Cubic Meter 2 Cost of soil Purchased from out side 575Cubic Meter A It is ... 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

Fundamental Managerial Accounting Concepts

Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old

7th edition

978-0077632427, 77632427, 78025656, 978-0078025655

More Books

Students also viewed these Accounting questions

Question

What kind of rays are X-rays?

Answered: 1 week ago