Question
X Company uses 30 units of Part A per month in the production of its main product. The manufacturing cost per unit of Part A
X Company uses 30 units of Part A per month in the production of its main product. The manufacturing cost per unit of Part A are as follows:
Material P 2,000
Handling costs 200
Direct Labor 10,000
Factory Overhead (40% fixed) 20,000
Total P 32,200
Handling cost is applied at 10% of cost of direct materials and/or any purchased parts. Y Company, a producer of Part A has offered to supply the part for X at P 24,000 per unit. If X accepts Y's offer, the resulting idle facility may be used to produce another product which is expected to earn P 100,000 per month.
Required: Should the X make Part A or buy it from Y?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started