Ask Question
26 January, 10:37

Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 units is: Direct material $ 45,000 Direct labor 30,000 Factory overhead (30% is variable) 98,000 If Bannister can buy 1,000 units from an outside supplier for $100,000, it should:

+3
Answers (1)
  1. 26 January, 10:53
    0
    Production total cost = $104,400

    It is more profitable to buy the product.

    Explanation:

    Giving the following information:

    Production costs (1,000 units):

    Direct material $ 45,000

    Direct labor $30,000

    Factory overhead (30% is variable) 98,000

    Buy:

    1,000 units from an outside supplier for $100,000.

    I will assume that the fixed overhead is not avoidable, therefore it should not be taken into account for the decision making.

    Production total cost = 45,000 + 30,000 + (98,000*0.3)

    Production total cost = $104,400

    It is more profitable to buy the product.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing 1,000 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers