Day Star collected the following information:Cost to buy one unitProduction costs per unit:Direct materialsDirect labourVariable overheadTotal fixed overheadDay Star can sell 25,000 units per year, at $80 each. The company also has an offer from a subsidiary to rent its plant facilities for$2,000,000. The fixed overhead will be incurred in each alternative, but there will be a savings of $150,000 in the fixed costsunder the renting alternative.A) buyBased on the above information only, should Day Star make or buy the product or rent its facilities out?B) make$22$16$2$360,000C) either make or buy - indifferent$48D) rent the facilities to the subsidiaryE) either make or rent - indifferent

The company evaluates the alternatives based on cost and benefit analysis. For example, en entity…

Answered: Day Star collected the following…

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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Galla Incorporated needs to determine a price for a new product. Galla desires a 25% markup on the total cost of the product. Galla expects to sell 5,000 units. Additional information is as follows: Fixed Costs (total) Variable Costs per Unit Direct materials Direct labor $ 21 Overhead 22 General and administrative 20 26 Overhead General and administrative Using the total cost method what price should Galla charge? $ 45,000 18,000
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