Should almond delites make or buy the almond biscuit

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Reference no: EM133502675

Case: Almond Delites manufactures various types of biscuits. FMF Biscuits Ltd has approached Almond Delites with a proposal to sell the company its top-selling biscuit at a price of $22 000 for 20 000 units. The costs shown are associated with the production of 20 000 units of almond biscuits.

Direct materials $12,000

Direct labour $ 5,000

Manufacturing overhead $ 8,000

Total cost $25,000

The manufacturing overhead consists of $2 000 of variable costs, with the balance being allocated to fixed costs. Assume that 40% of the fixed costs would be avoidable if the almond biscuits were purchased externally rather than produced internally.

Question 1: Should Almond Delites make or buy the almond biscuit?

Question 2: What qualitative factors should Almond Delites consider before making its decision?

Reference no: EM133502675

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