chemical into the weed RIIl If the company decides to process further, how will

Question

chemical into the weed RIIl If the company decides to process further, how will it affect the operating Expected Reve tom cellnllg prccess sthe sF50poo @ ?.Zo Cost ????? Problem 9 (Bonus points 10): SoftSeats produces chairs and couches for reception areas and executive suites. Historically, SoftSeats has manufactured their own cushions for the chair they sell. However, a cushion manufacturer has recently approached SoftSeats with an offer to produce their cushions for them for $45 per cushion. SoftSeats incurs the following costs in the production of the seat cushions: $10 for direct materials, $20 for direct labor, $10 for variable overhead, and $10 for fixed overhead. Management is wondering whether they should accept the offer. What would be the increase or decrease in per-unit costs if the cushions were purchased from the outside supplier?

Explanation / Answer

Differential analysis :

If Cushions were purchase from outside supplier then per unit cost increase by $5 per unit

Make Buy Direct material 10 Direct labour 20 Variable overhead 10 Purchase price 45 Total 40 45

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