Harmony is currently producing 100 units of a necessary component part by incurring P60,000 in direct materials, P12,500 in direct labor, P22,500 in variable overhead, and P15,000 in fixed overhead. Harmony can purchase the component externally for P95,000 and only P2,500 of fixed manufacturing costs cannot be avoided (the rest are avoidable). How much savings will Harmony realize in buying instead of making the component?
Harmony is currently producing 100 units of a necessary component part by incurring P60,000 in direct materials, P12,500 in direct labor, P22,500 in variable overhead, and P15,000 in fixed overhead. Harmony can purchase the component externally for P95,000 and only P2,500 of fixed manufacturing costs cannot be avoided (the rest are avoidable). How much savings will Harmony realize in buying instead of making the component?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Harmony is currently producing 100 units of a necessary component part by incurring P60,000 in direct materials, P12,500 in direct labor, P22,500 in variable overhead , and P15,000 in fixed overhead. Harmony can purchase the component externally for P95,000 and only P2,500 of fixed manufacturing costs cannot be avoided (the rest are avoidable). How much savings will Harmony realize in buying instead of making the component?
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