Question
Volkswagen manufactures 10,000 car batteries annually. The cost components per battery are as follows: Item Cost per Battery Direct materials 50 Direct labor 30 Variable
Volkswagen manufactures 10,000 car batteries annually. The cost components per battery are as follows:
| Item | Cost per Battery |
|---|---|
| Direct materials | €50 |
| Direct labor | €30 |
| Variable manufacturing overhead | €20 |
| Fixed manufacturing overhead | €15 |
| Total | €115 |
A proposal from Continental offers to supply 10,000 car batteries at €100 each. Volkswagen's fixed overhead will decrease by €50,000 if the offer is accepted.
- Conduct a differential analysis to decide if Volkswagen should make or buy the batteries.
- Assess the total cost change if the offer is accepted.
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Accounting Information Systems
Authors: Marshall B. Romney, Paul J. Steinbart
12th edition
132552620, 978-0132552622
