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Should the company make or buy the items

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Reference no: EM132565475

Limos Mfg. has been manufacturing furniture sets and is considering whether to make or outsource its own seat cushions needed for its chairs. The expected price of the cushions is P50 per unit.

If it continue to produce the company would incur the following unit cost: Direct materials P13, Direct Labor P15, Variable overhead 5, Fixed overhead (based on the average production requirement of 10,000 units) P20 for a total of P53.

Question 1: Assume that 40% of the fixed factory overhead could be eliminated if the company would discontinue the manufacture of seat cushions. Should the company make or buy the items?

Reference no: EM132565475

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