ABC Company manufactures Part AA for use in its production cycle. The costs per unit for25,000 units for the part are as follows:Direct materialsP 7.50Direct labor37.50Variable overhead15.00Fixed overhead20.00XYZ Company has offered to sell ABC Company the 25,000 units needed by the latter for P75per unit. If ABC Company accepts the offer, the released facilities could be rented out in theamount of P112,500. In addition, P12.50 per unit of fixed overhead applied to part AA would beeliminated or avoided.What alternative is more desirable and by what amount it is more desirable?1. Buy - P 50,0002. Make - P50,0003. Buy - P262,5004. Make - P 262,500O 1O 2O 3O 4

Answered: 37.50 15.00

Business

Accounting

37.50 15.00

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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