(a) Calculate the cost per unit of producing the canisters under the traditional approach
(b) Should the company purchase the canisters or continue manufacturing them ?Show workings
(c) The company has decided to continue manufacturing the canisters and has a special order for the canisters from an outside client who has offered $1.40 per canister for 20,000 canisters . As the firm has capacity purely on financial grounds should the firm accept the offer?
(d) What other factors should the firm consider before deciding whether to accept the order inpart (c)?
(e) The Playdough company has been approached to manufacture special coffee cups .This would have the following costs per unit
Direct material $ 0.60
Direct labour 0.20
Variable overhead 0.10
Fixed overhead 0.15
The coffee cups would then be sold for $1.20 per coffee cup .It could manufacture and sell 400,000 of these coffee cups . Should.the Playdough company purchase the canisters from the Canister company and start manufacturing coffee cups or continue manufacturing canisters? Show workings .
(f) Are there any other factors which should be considered in deciding whether to manufacture the canisters or purchase them from the outside supplier?