Reference no: EM132830765
Scents is a perfume manufacturer. The company is considering the manufacture of a new product called Aroma. The accounting department has developed the following estimate of cost, based on expected production of volume of 100,000 bottles:
total labor, material, variable overhead cost: $2/bottle
total fixed cost: $150,000
It is possible for Scents to buy the bottles rather than make them. Another cosmetics manufacturer has indicated that it would be willing to sell the tubes to Scents at a price of 3 dollar per bottle.
Problem 1. What is the total variable cost for 100,000 bottles if make?
Problem 2. What is the total variable cost for 100,000 bottles if buy?
Problem 3. What is the total cost if make?
Problem 4. Assume that Scents will incur total fixed cost of $150,000 no matter make or buy, what is the total cost if buy? Should Scents make or buy? (please answer "make" or "buy")
Problem 5. Assume that Scents can save $120,000 in fixed cost if buy, what is the total cost if buy? Should Scents make or buy? (please answer "make" or "buy")
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