Reference no: EM132552946

Ecosystems requires packing boxes for their products. If the company were to make the boxes themselves, the costs per unit would be:

Materials Rs. 2

Labor Rs. 3

Overhead Rs. 5

Total Rs. 10

• The overhead consists of a variable cost of Rs 2 per unit and organization wide fixed allocation of Rs.60000 based on the normal output of 20 000 boxes. Other costs include transport of the boxes to the assemble plant, Rs 0.20 per unit, and rent for the box plant premises Rs 8000 per year.

• An alternative is to purchase boxes from an external supplier for Rs.7 per box, including the cost of delivery. If boxes were purchased externally, then the Ecosystems box plant would be shut down, and a stores worker would need to be employed for Rs 14 000 per year.

Question (i) Should Ecosystems make or buy the packing boxes?

Question (ii) What other factors should be considered?