3. Pleasanton Company manufactures and sells 10,000 telephones per year for $540

Question

3. Pleasanton Company manufactures and sells 10,000 telephones per year for $540 each. The full manufacturing costs per telephone are as follows Direct materials Direct labor Variable manufacturing overhead Average fixed manufacturing overhead Total s 4 16 10 The Telecom America has offered to sell Pleasanton 10,000 telephones for $32 per unit. If Pleasanton Company accepts the offer, $25,000 of fixed overhead will be eliminated. a. Prepare a differential analysis of the relevant costs and revenues associated with the decision to make or buy the phones. b. Should Pleasanton Company make or buy the phones? What other factors should they consider in this decision? ace FS F6 F7 F8 F9 F10 F11 F12 SysRa Break 5 6 7 8 9 0 0

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Make Buy Differential Direct Materials =10000*4            40,000.00            40,000.00 Direct Labour =10000*16         160,000.00         160,000.00 Variable Manufacturing =10000*10         100,000.00         100,000.00 Fixed Cost            25,000.00            25,000.00 Purchase cost =10000*32         320,000.00       (320,000.00) Total Relevant Cost         325,000.00         320,000.00              5,000.00 Pleasanton company should buy the phones They should consider factors like quality supplied, Sustainability of supplier, Impact on other products.

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