POPOL Company manufactures 100,000 units of Part P yearly as a major component for one of its finished goods. The current report shows the breakdown of the total manufacturing costs of Part P: Direct materials P120,000 Direct labor 80,000 Variable overhead 40,000 Fixed overhead 160,000 Kupa Company, a third party entity, has submitted a proposal to sell POPOL 100,000 units of Part P annually. If POPOL started sourcing these from outside, the plant and equipment currently used to product Part P can be used to manufacture other products of POPOL. This will yield potential savings of P10,000 related to lease production capability to support manufacture of other products of POPOL. As the management accountant, what will be the highest price per unit that you will recommend to management of POPOL to pay Kupa for Product P without compromising its current profitability?
POPOL Company manufactures 100,000 units of Part P yearly as a major component for one of its finished goods. The current report shows the breakdown of the total
Direct materials P120,000
Direct labor 80,000
Variable
Fixed overhead 160,000
Kupa Company, a third party entity, has submitted a proposal to sell POPOL 100,000 units of Part P annually. If POPOL started sourcing these from outside, the plant and equipment currently used to product Part P can be used to manufacture other products of POPOL. This will yield potential savings of P10,000 related to lease production capability to support manufacture of other products of POPOL. As the
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