Reference no: EM133129573

Question - Badillo Company has 15,000 hours of idle capacity. They need 20,000 units of a component part used in its product lines. It is estimated that each unit will take one-half machine hour for production. The following information is available:

Cost to make the parts:

Materials Php 14

Direct Labor 18

Factory Overhead (75% of DL/unit)

Variable factory overhead (40% of factory ovh/unit)

Cost to buy the parts per unit from the supplier Php 45

If Badillo Company buys the parts rather than producing them, it will save 60% of fixed overhead cost per unit.

1. Determine the relevant unit costs.

2. Determine the relevant total costs and differential costs.

3. Should Badillo Company manufacture the parts, or should it buy them from the outside supplier?