Questions
BACC011 Week 11: Practice Quiz
Short answer
Fancy phone covers makes and sells phone covers. They sell 200 covers for $20 each. To make one cover costs $2 in direct materials, $3 in direct labour, $1 for plastic wrap packaging and fixed costs of $600. Another business has offered to sell Fancy phone covers 200 of the exact same covers for $7 each. If Fancy buys the covers then they won't need to pay $206 of the fixed costs. When making this make or buy decision, what is the relevant cost to make the covers per cover? Round your answer to two decimal places.
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Step-by-Step Analysis
The problem describes a make-or-buy decision for Fancy phone covers.
First, identify the costs incurred if making the cover in-house: direct materials $2, direct labour $3, and packaging $1 add up to a variable cost per unit of $6.
Next, consi......Login to view full explanationLog in for full answers
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