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ABC company manufactures a particular computer component. Currently, the cost per unit is as follows: Direct Materials;P50, Direct Labor,P500; Variable Overhead,P250; Fixed Overhead,P400XYZ company has obtained with an offer to sell 10,000 units of the component for P1,100 per unit. If ABC accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should ABC make or buy the component?  Select the correct response:   Make due to savings of P3,000,000  Buy due to savings of   P1,000,000  Buy due to savings of   P2,500,000  Make due to savings of P500,000

ABC company manufactures a particular computer component. Currently, the cost per unit is as follows: Direct Materials;P50, Direct Labor,P500; Variable Overhead,P250; Fixed Overhead,P400XYZ company has obtained with an offer to sell 10,000 units of the component for P1,100 per unit. If ABC accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should ABC make or buy the component?  Select the correct response:   Make due to savings of P3,000,000  Buy due to savings of   P1,000,000  Buy due to savings of   P2,500,000  Make due to savings of P500,000

FINANCIAL ACCOUNTING
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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ABC company manufactures a particular computer component. Currently, the cost per unit is as follows: Direct Materials;P50, Direct Labor,P500; Variable Overhead,P250; Fixed Overhead,P400XYZ company has obtained with an offer to sell 10,000 units of the component for P1,100 per unit. If ABC accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should ABC make or buy the component? 
Select the correct response: 
 Make due to savings of P3,000,000
 Buy due to savings of   P1,000,000
 Buy due to savings of   P2,500,000
 Make due to savings of P500,000

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