ILLUSTRATION 13.2 Expansion Ltd. manufactures automobile accessories and parts. Following are the total...
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ILLUSTRATION 13.2 Expansion Ltd. manufactures automobile accessories and parts. Following are the total costs of processing 1,00,000 units : Direct Material Cost $5 lakhs ; Direct Labour Cost $8 lakhs ; Variable Factory Overheads $6 lakhs; Fixed Factory Overheads $5 lakhs. The purchase price of the component is $22. The fixed overhead would continue to be incurred even when the component is bought from outside although there would have been reduction to the extent of $2,00,000. Required (a) Should the part be made or bought considering that the present facility when realised following a buying decision would remain idle. (b) In case the realised capacity can be rented out to another manufacturer for $1,50,000 having good demand, what should be the decision
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