Sunshine Fruit Co. makes its own shipping boxes. The annual cost to make 80,000
ID: 2724824 • Letter: S
Question
Sunshine Fruit Co. makes its own shipping boxes. The annual cost to make 80,000 boxes is: Suppose Mayerhouser offers to sell them boxes for $2.60 per box How much, if any, will Sunshine Fruit save by buying the boxes? Suppose that all the above fixed costs are depreciation for equipment purchased at $600,000 which is at the end of its 10-year life. New replacement equipment will cost $800,000 and haw a 10-year life also. How much, if any, will Sunshine Fruit save by buying the boxes under these circumstances?Explanation / Answer
b relevant cost of manufacture materials 1.875 labor 0.3125 variable indirect cost 0.2375 total 2.425 cost of buy per unit 2.6 savings per unit -0.175 c revised per unit relevant cost variable cost 2.425 avoidable fixed cost 10 total 12.425 cost of buy per unit 2.6 net cost per unit 7.4