Business, 11.11.2020 17:50 tommyaberman

A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $75 per unit (100 bottles), including fixed costs of $28 per unit. A proposal is offered to purchase small bottles from an outside source for $40 per unit, plus $4 per unit for freight. a. Prepare a differential analysis dated July 31 to determine whether the company should make or buy the bottles, assuming fixed costs are unaffected by the decision.
b. Determine whether the company should make or buy the bottles.

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Answer from: momodagrate

Part a

Differential analysis to determine whether the company should make or buy the bottles.

Make Buy

Variable manufacturing costs ($75 - $28) $47

Purchase price $40

Freight charges $4

Total Cost $47 $44

Part b

The Company should Buy instead of making the bottles. This is because it costs $3 more to make the bottles than buying them.

Explanation:

The make or buy decision should be done by considering relevant costs. The fixed costs are irrelevant in this decision hence, we have to ignore them.

The alternative course which gives the lowest cost is the one to go for. This will minimize the costs for the entire business and in turn maximizes the profits of the company.

Answer from: Quest

was my answer wrong?

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

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