ANSWER
Req 1: | ||||||
Reelevant cost of making the Starters | ||||||
Directc material | 4 | |||||
labour | 3 | |||||
Supervision | 1.6 | |||||
Variable manufacturing cost | 0.5 | |||||
Relevant cost of manufacturing | 9.10 | per unit | ||||
Req 2: | ||||||
Relevant cost of purchasing the starters | 9.40 per unit | |||||
Req 3: | ||||||
Net financial advantage / Disadvantage of Purchase | ||||||
Cost of purchasing (60,000*9.40 ) | -564,000 | |||||
Les: Relevant of manufacture (60,000*9.10) | 546,000 | |||||
Net financial disadvantage | -18,000 | |||||
Profit would decrease by $18,000 per period | ||||||
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For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to...
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