FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Manufacturing Costs
Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.
Question

What are the fixed overhead costs of making the component?

 
NUBD's shop can make 1,000 units of a necessary component with the following costs: Direct materials Direct labor Variable overhead Fixed overhead P64,000 P16,000 P8,000 The company can purchase the 1,000 units externally for P104,000. The unavoidable fixed costs are P5,000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part.
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Transcribed Image Text:NUBD's shop can make 1,000 units of a necessary component with the following costs: Direct materials Direct labor Variable overhead Fixed overhead P64,000 P16,000 P8,000 The company can purchase the 1,000 units externally for P104,000. The unavoidable fixed costs are P5,000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part.
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