The Cook\'s Friend Company (CFC) supplies exhaust fans and fire protection equip

Question

The Cook's Friend Company (CFC) supplies exhaust fans and fire protection equipment to restaurants. The company is known for a fire screen that fits over the back of cooking grills and protects the wall. Annual production and sales is 20,000 units, but CFC has capacity to manufacture 25,000 per year. The profit associated with one unit is as follows: Price Variable cost of manufacturing Fixed manufacturing cost Fixed selling and administrative cost Profit $15.00 7.50 4.50 1.50 $1.50 A supplier has offered to sell 20,000 screens to Cook's Friend at a price of $10 each. A. Explain whether the supplier's offer should be accepted. Show appropriate calculations. (5 marks)

Explanation / Answer

No supplier offer should not be accepted as relevant cost of make is less Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Make Buy Differential Variable cost of manufacturing                    7.50                                      7.50 Purchase cost                   10.00                                 (10.00) Total Relevant cost                    7.50                   10.00                                    (2.50)

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