Managerial Accounting Question - Printable Version +- Accountancy Forum (https://www.accountancy.com.pk/forum) +-- Forum: The Profession (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=4) +--- Forum: Students (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=13) +--- Thread: Managerial Accounting Question (/showthread.php?tid=5557) |
Managerial Accounting Question - faisal_ali - 03-15-2009 can any one solve this? A company manufactures one product. Variable costs are $600,000. Fixed Costs are $300,000. If it bought the product from another supplier, it could use existing machinery to make a contribution of $400,000. Fixed Costs would not change. What is the maximum price it should pay to obtain the product from another supplier. A. $600,000 B. $700,000 C. $900,000 d. $1,000,000 - Adil.Iqbal - 03-16-2009 One should only consider relevant cost while making decisions of make or buy. The option of $600.000/- is the correct answer. Best Regards, @d!l - faisal_ali - 03-16-2009 Thats i thought but this is not a right answer dear as per book i have.............. <blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Adil.Iqbal</i> <br />One should only consider relevant cost while making decisions of make or buy. The option of $600.000/- is the correct answer. Best Regards, @d!l <hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote"> - wasim akram - 03-16-2009 1000,000 Maximum price to pay. +300,000 Fixed Cost -400,000 Contribution of machinery if purchased out side =900,000 Manufacturing cost ( Fixed + Variable) So can not go beyond 1,000,000 In my opinion option D is ok - Adil.Iqbal - 03-16-2009 Fixed cost is not non relevant cost (period cost) which must not be consider but you may be right since I take this question as Decision Making Qs as you've mention in your question the maximum price to pay..... - faisal_ali - 03-17-2009 Thanks ...... |