Dawn Incorporated manufactures Zulueta, a high-end beauty product. The cost per unit for 10,000 units for Zulueta are as follows: Direct materials, P5; Direct labor, P10; Variable OH, P7; Fixed OH, P10 Richard Company has offered to sell Dawn 10,000 units of Zulueta for P30 per unit. If Dawn accepts Richard's offer, the released facilities could be used to save P45,000 in relevant costs in the manufacture another product. In addition, P7 per unit of fixed overhead applied
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18
Dawn Incorporated manufactures Zulueta, a high-end beauty product. The cost per unit for 10,000 units for
Zulueta are as follows:
Direct materials, P5; Direct labor, P10; Variable OH, P7; Fixed OH, P10
Richard Company has offered to sell Dawn 10,000 units of Zulueta for P30 per unit. If Dawn accepts
Richard's offer, the released facilities could be used to save P45,000 in relevant costs in the manufacture
another product. In addition, P7 per unit of fixed overhead applied to Zulueta would be totally eliminated.
What alternative is more desirable and by whata amount is it more desirable?
a. Manufacture, P10,000
b. Manufacture, P15,000
c. Buy, P35,000
d. Buy, P65,000
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Solved in 3 steps
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