Owly Corporation’s agriculture division currently produces their own soil mix to grow the plants they sell in. Owly currently makes 200,000 cubic meters of soil mix a year. Each cubic meter of soil mix has direct labour costs of $1.50, direct material costs of $3.15, variable overhead costs of $0.75, and fixed overhead costs of $0.70 for a total cost of $6.10 per cubic meter. An outside supplier has offered to sell Owly soil mix for $5.75 per cubic meter. If Owly purchases the soil mix, 25% of the fixed manufacturing overhead will be eliminated, the remaining 75% will still exist. A. What is the net dollar advantage (disadvantage) of purchasing the soil mix rather than making it? B. What is the maximum amount Owly is willing to pay an outside supplier per cubic meter (to the cent) for the soil mix if the supplier commits to supplying all 200,000 cubic meters? C. After one month of greenhouse growing time Owly can produce 100,000 four inch pot basil plants that can be sold for $2.20 each. Another month in the greenhouse results in 80,000 ten inch pot basil plants that can be sold for $4.80 each. A month of greenhouse growing time costs Owly $135,000. What is the dollar advantage (disadvantage) of growing the plants for another month?
Owly Corporation’s agriculture division currently produces their own soil mix to grow the plants they sell in. Owly currently makes 200,000 cubic meters of soil mix a year. Each cubic meter of soil mix has direct labour costs of $1.50, direct material costs of $3.15, variable
A. What is the net dollar advantage (disadvantage) of purchasing the soil mix rather than making it?
B. What is the maximum amount Owly is willing to pay an outside supplier per cubic meter (to the cent) for the soil mix if the supplier commits to supplying all 200,000 cubic meters?
C. After one month of greenhouse growing time Owly can produce 100,000 four inch pot basil plants that can be sold for $2.20 each. Another month in the greenhouse results in 80,000 ten inch pot basil plants that can be sold for $4.80 each. A month of greenhouse growing time costs Owly $135,000. What is the dollar advantage (disadvantage) of growing the plants for another month?
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