Lingkod Company, a manufacturer of furniture sets, is considering to purchase the seat cushions needed for its chairs. The expected purchase price of these seat cushions is P50 per unit. Lingkod has been making its own seat cushions since it started operating. If it would continue to produce these cushions, the company expects to incur the ff costs: Raw materials - P13, Direct labor-P15, variable OH-P5 and Fixed OH (based on the average production requirement of 10,000 units)-P20. Should the company continue to make the seat cushion or buy from outside supplier?

Lingkod Company, a manufacturer of furniture sets, is considering to purchase the seat cushions needed for its chairs. The expected purchase price of these seat cushions is P50 per unit. Lingkod has been making its own seat cushions since it started operating. If it would continue to produce these cushions, the company expects to incur the ff costs: Raw materials - P13, Direct labor-P15, variable OH-P5 and Fixed OH (based on the average production requirement of 10,000 units)-P20. Should the company continue to make the seat cushion or buy from outside supplier?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Example 1Lingkod Company, a manufacturer of furniture sets, is considering to purchase the seat cushions needed for its chairs. The expected purchase price of these seat cushions is P50 per unit. Lingkod has been making its own seat cushions since it started operating. If it would continue to produce these cushions, the company expects to incur the ff costs: Raw materials - P13, Direct labor-P15, variable OH-P5 and Fixed OH (based on the average production requirement of 10,000 units)-P20. Should the company continue to make the seat cushion or buy from outside supplier? Example 2Using the same data in example 1 for Lingkod Company, assume that 40% of the fixed factory OH could be eliminated if the company would discontinue the manufacture of seat cushions. Should the company make or buy the items? Example 3Using the same data in example 1 for Lingkod Company, assume that 40% of the fixed factory OH could be eliminated if the company would discontinue the manufacture of seat cushions.…
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