Adan Sdn Bhd (ASB) operates in a large town area. Currently, ASB has its own factory to produce butter cookies. The unit cost to produce the butter cookies are as follows: Raw materials 0.4 Direct labour 0.5 Variable overhead 0.3 Fixed overhead 0.6 Total 1.8 Fixed overhead is detailed as follows: Avoidable fixed overhead 2,000 Depreciation of equipment 1,000 A local manufacturer has offered to supply ASB all the butter cookies it needs. Its price is RM1.70. If the offer is accepted, the equipment used by ASB would be scrapped (it is old and has no market value). ASB produce 5,000 butter cookies per month. Required: Analyze and determine whether ASB should continue to make its own butter cookies or to purchase from the external supplier.

Adan Sdn Bhd (ASB) operates in a large town area. Currently, ASB has its own factory to produce butter cookies. The unit cost to produce the butter cookies are as follows: Raw materials 0.4 Direct labour 0.5 Variable overhead 0.3 Fixed overhead 0.6 Total 1.8 Fixed overhead is detailed as follows: Avoidable fixed overhead 2,000 Depreciation of equipment 1,000 A local manufacturer has offered to supply ASB all the butter cookies it needs. Its price is RM1.70. If the offer is accepted, the equipment used by ASB would be scrapped (it is old and has no market value). ASB produce 5,000 butter cookies per month. Required: Analyze and determine whether ASB should continue to make its own butter cookies or to purchase from the external supplier.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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